Interview with VW Group CEO
Can you still sleep at night, Mr. Blume?
23.09.2024, 14:04
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CEO Blume believes that the announced tough cuts at Volkswagen are unavoidable. He would currently rate the brand’s current situation as worse than a grade of four. At the auto summit, he will probably push for a new purchase bonus for electric cars.
VW Group CEO Oliver Blume has defended the new austerity measures. The economic environment has changed dramatically, he told the broadcasters RTL/ntv. The Volkswagen brand is no longer internationally competitive at current costs. At the beginning of September, Volkswagen announced that it would significantly tighten the austerity measures at the core VW brand. Redundancies and even factory closures are no longer ruled out. The job security that has been in place for 30 years has been terminated.
When asked whether he sometimes couldn’t sleep at night, Blume said he could understand the concerns many VW employees had about the future. He was responsible for the group and its brands. The car manufacturer would “fight for every job,” stressed Blume. In the end, however, the goal was to “make the Volkswagen Group economically successful.”
Blume spoke of “considerable price pressure” and attributed this primarily to two developments: Firstly, fewer cars are being sold in Europe overall, and secondly, competition in China is increasing. “We can no longer rely on earnings from China,” said Blume. “The pie has become smaller, and we have more guests at the table.” The VW Group sells a good third of its cars in China.
Blume sees a need for action, particularly at the Volkswagen brand. There must be drastic cuts in costs. In the coming weeks, all levers will be examined to improve the cost position. “We cannot rule out capacity reductions. In the same vein, we will work for every job. The key factor is how we manage to reduce costs,” said the VW Group CEO. “The more we do there, the better we can maintain capacity.”
“Room for improvement”
When asked to give the current situation of the VW Group a grade, Blume was self-critical: “If I look at the overall situation, I would rather give it a four. A four is not hopeless, but we have significant room for improvement and room for improvement.” His rating for the VW brand was even worse. “It is much more critical, and that is why we need to take action there in the short term.”
In the first half of the year, the group earned 8.5 billion euros – 14 percent less than in the same period last year. The result was spoiled above all by the already low-profit core brand Volkswagen, whose operating profit shrank by 41 percent. This was also due to the costs of the ongoing staff cuts there. The group has set aside 900 million euros for severance payments of up to 474,000 euros per employee, half of which has already been firmly planned.
In the last fiscal year, Volkswagen paid out 4.5 billion euros to its shareholders. When asked how these dividends could be reconciled with the savings announcements, Blume stressed that the group was “still on a successful path.” 13 brands contributed to this. Every investor expected to receive a return. “In return, dividends are paid that are based on how successful a company is.”
Blume thinks the auto summit taking place this afternoon with industry representatives and Federal Minister of Economics Robert Habeck is a good idea. He apparently wants to push for a new purchase bonus for electric cars.
Bonuses could “stimulate in the short term, especially in the entry-level segments,” he said. The main thing is “to think about tax models for vehicles used for business purposes” and also “to give tax incentives for the first registration of electric vehicles and then of course also to look at cost issues such as electricity prices, which play a significant role in charging.” The so-called environmental bonus for the purchase of electric cars was abolished at short notice at the end of 2023 in the wake of the budget crisis. The subsidy program was originally planned to run until the end of 2024.