‘There would be no Wolfsburg without Volkswagen’: Carmaker’s plans shake home town
As Germany’s largest private employer moves to break its job security pledge, city fears its identity will be lost
At Altdeutsche Bierstube, the oldest bar in Wolfsburg, a man at the counter pondered whether Volkswagen’s home town would go the way of Michigan’s Flint — the birthplace of General Motors, once known as “Vehicle City”.
In the mid-80s, GM had announced it could no longer competitively build cars in Flint as it struggled with sliding sales and the rise of Asian low-cost rivals. It whittled down its operations in the city that, like other US locations in the rustbelt hit by the industrial decline, went from one financial crisis to the next, becoming known as one of the country’s most dangerous cities.
The man drinking his rum-laced tea glumly noted, that whether Wolfsburg, known as Germany’s “Die Autostadt”, would suffer a similar fate, depended on VW’s next move as it faces up to slowing demand, increasing competition and high costs.
For decades, Wolfsburg and its car plant — the world’s largest — symbolised Germany’s miraculous postwar industrial revival. VW’s crisis, and its plan to close some German factories, has unleashed angst among the city’s 120,000 inhabitants, many of whom work directly for the carmaker.
“There would be no Wolfsburg without Volkswagen,” said Anke Jentzsch, who joined VW as a trainee more than 20 years ago, highlighting the high stakes as Germany’s largest private employer this week walked back on its promise not to axe workers in its home country.
Wolfsburg was founded by the Nazi government a year before the outbreak of the second world war to house workers who were to build the Volkswagen — the people’s car. Since then, more than 48mn cars have rolled off Wolfsburg’s production lines, more than anywhere else in the world.
Today, VW employs 60,000 people in Wolfsburg, and just as many in the central German state of Lower Saxony, which is teeming with automotive suppliers that exist only because of the demands of Europe’s largest carmaker. Jentzsch, who works in VW’s 12,000-people strong technical development team, added that the company’s importance to the region stretched beyond the automotive sector to “the baker around the corner, the hairdresser”.
But the shift towards electric vehicles is costly, as is the race to develop smoothly running software. Growing competition from Chinese start-ups known for their prowess in modern technologies, is only going to further erode VW’s share in the diminishing European car market, its top executives have warned in recent weeks.
“We want to enter into negotiations to ensure Volkswagen’s long-term competitiveness,” VW’s head of human resources, Gunnar Kilian, wrote in a note to employees as the company last week formally notified the IG Metall union that its three-decade old job security guarantee was now void.
The union and VW’s powerful works council, which sits on half the seats on the company’s supervisory board, have made clear that they will challenge any attempts to cut jobs or shut plants.
“We will fiercely defend ourselves against this historic attack on our jobs,” works council chair Daniela Cavallo said last week, as she argued that job cuts would not address the key issue — sliding demand for VW cars. Her clashes with Blume’s predecessor Herbert Diess following his hints at potential lay-offs was a key factor in his sudden dismissal two years ago.
The threat by Germany’s largest private employer to sack workers has led Chancellor Olaf Scholz and former EU industry commissioner Thierry Breton to wade in, with both having expressed concern about the future of Europe’s largest industrial base.
“This is VW’s biggest crisis since the early 90s,” said Helena Wisbert, a professor of business administration at Ostfalia University in Wolfsburg, who previously worked for the company.
At the VW-sponsored automotive theme park Die Autostadt, which sits adjacent to the carmaker’s headquarters, the pervading sense of gloom was strangely absent.
Some one million people visit each year, and Beate Altenhoff-Urbaniak offers guided tours to the hundreds of people who come each day especially to pick up their brand new Volkswagen, Seat and Cupra cars. Hours before, she had guided a couple from Lübeck, on the Baltic coast, who had made the four-hour drive to pick up Volkswagen’s popular SUV, T-Roc. “For the lady,” Altenhoff-Urbaniak said, with a smile.
But demand for the T-Roc, which last year was VW’s best-selling SUV in Europe, has not been managed to offset the trend towards lower sales and higher costs.
VW’s CFO Arno Antlitz this month warned that the group’s namesake brand — which accounts for roughly half of the group’s car production — had been spending more money than it was earning “for some time”.
The discrepancy was long masked by the company’s success in China, where low production costs and high regard for German brands made it the company’s most profitable market.
But VW has been losing market share in China, amid increasing appetite from domestic consumers for homegrown brands such as BYD. Chinese sales of Porsche cars — which Blume has continued to lead, even after he took on the chief executive role of the entire VW group — were a third lower in the first half of 2024, compared with the same period last year.
The growing uncertainty about VW’s future in China has forced executives to address issues at home that have been evident for years.
Suppliers such as Bosch, Continental and ZF Friedrichshafen took the first hit when customers such as VW started building fewer cars, and have in the past five years announced tens of thousands of job cuts.
At VW, some of its 300,000 workers in Germany have already faced de facto pay cuts as several plants have had to scrap night shifts to adapt to slowing demand.
Most plant workers rotate between morning, afternoon and nights shifts. Night duty is most lucrative, meaning that workers relieved of it face a shortfall of hundreds of euros per month.
Benny Littau, who works in a Wolfsburg plant where the Golf is made, said that while he was partly relieved to have stopped working nights two years ago, he was also feeling the effects on his bank account.
“Many of my colleagues started having issues with their mortgages,” Littau said, while expressing frustration with the common perception that VW workers are exceptionally well off. “It is physically demanding labour [ . . . ] we work hard for the money”.
Wolfsburg’s mayor, Dennis Weilmann, told the Financial Times that he could sense growing frustration among the city’s inhabitants. “Naturally, there is growing concern about jobs,” he said.
But he added that VW’s woes, and its implications for the city and its neighbouring towns, had put more than employment at stake. “My father and both my grandfathers worked for Volkswagen,” he said, “Volkswagen is part of our identity”.