VW to cut jobs and overhaul main plant in face of Tesla challenge

Volkswagen’s results come amid renewed clashes between Herbert Diess, chief executive, and the company’s powerful works council © REUTERS

Carmaker moves to compete with US rival’s new German factory

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Volkswagen will transform its main Wolfsburg plant and cut jobs to compete with Tesla’s new German factory as it struggles to meet demand for its cars because of the global semiconductor crisis.

Bottlenecks in chip supply had wiped almost €500m off Volkswagen’s pre-tax profits in the last quarter, the company said on Thursday, as its output shrank by 800,000 cars compared with the same period in 2020.




“Customer demand is high, we have more than 1m vehicles in our order bank in western Europe alone,” said chief executive Herbert Diess, adding that there was a backlog for 10,000 units of Porsche’s electric Taycan model, which competes with Tesla’s Model S.

The challenges facing the German group, Europe’s largest maker of electric cars, come as Tesla enjoys record profits having delivered a record 241,300 vehicles in the three months to the end of September.

VW’s woes were currently “clearly supply not a demand issue”, Diess said, adding that “the results of the third quarter show once again that we must now systematically drive forward the improvement in productivity in the volume sector.

” Stellantis, whose Peugeot, Citroën, Opel and Fiat brands compete with VW in Europe, has also been hit by the chip shortages. The company said on Thursday its production in the quarter was down by a third.

But the group, formed by the merger between PSA and Fiat Chrysler, held fast to its profit guidance of a 10 per cent company-wide margin despite a 14 per cent drop in revenues to €32.6bn. VW said it was still targeting a margin of up to 7.5 per cent.

Diess, who has repeatedly said he believed a carmaker would be among the most valuable businesses in the world, watched this week as Tesla became a $1tn company, while VW’s market capitalisation is just $150bn despite having delivered just over 293,000 electric vehicles in the nine months to the end of September.

“There is a challenge from Tesla and we will keep the pace,” he told reporters in Wolfsburg on Thursday, referring to the US company’s plant in nearby Grünheide. “We will be able to demonstrate that our cars are fully connected and updatable,” he said, adding that Wolfsburg would be transformed to produce cars more quickly and cheaply.

Thursday’s results come amid renewed clashes between Diess and Volkswagen’s powerful works council, which represents the majority of its 292,000-strong German workforce, including roughly 60,000 at Wolfsburg.




The council on Wednesday accused the executive of being unwilling to engage with employees who have been furloughed and face an uncertain future, and of scheduling a meeting with US investors rather than turning up to a union appointment.

“This behaviour is unprecedented in the history of our company and shows once again that even in this crisis the chief executive has neither empathy nor sensitivity for the situation of the workforce,” said Daniela Cavallo, who took over as the council’s lead representative this year.

Late on Wednesday, Diess cancelled his other appointments and committed to meeting the works council, according to a person close to the chief executive.

But on Thursday Diess reignited the debate by emphasising that VW would “need some headcount reduction” to compete with Tesla. He declined to give a number.

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