Volkswagen makes sweeping production cuts

**Leanna Byrne** (0:01)
Jobs, factories and the future of Europe's biggest carmaker.

**Geetha Connemann** (0:04)
Energy prices are too high.
Taxes are too high. There is too much red tape.

**Beatrix Keam** (0:11)
And this will be, of course, a milestone for the German automotive industry.

**Leanna Byrne** (0:14)
It's World Business Report from the BBC World Service. I'm Leanna Byrne. Volkswagen is reportedly considering sweeping cuts with up to 100,000 jobs at risk. Also, YP King Duck has become the latest flashpoint in EU-China trade tensions. And Argentina has managed to repay billions in bond debt without returning to international markets. So how did it pull that off?
Volkswagen workers protested today at reports of potentially 100,000 job cuts and the closure of four plants. Just earlier, it confirmed it would cut both production capacity and the numbers of models, but it didn't go as far as confirming job cuts or plant closures. Geetha Connemann told colleagues in the German Bundestag where she thought Germany's automotive industry was going wrong.

**Geetha Connemann** (1:13)
The automotive industry needs a business location that keeps pace. That is precisely what has been lacking so far. Energy prices are too high.
Taxes are too high. Social security contributions are too high. There is too much red tape. The pace is too slow.
And there is too little trust.

**Leanna Byrne** (1:38)
And head of VW's Worker Council, Daniella Cavallo said, We expect the Board of Management to present a comprehensive plan for the future.

**Daniella Cavallo** (1:52)
We know we're in crisis. And by the way, it's not just Volkswagen, but the entire automotive industry. And there too, we read headlines every day about plant closures and workforce reductions.
In other words, we're dealing with deindustrialisation here in Germany.

**Leanna Byrne** (2:06)
Beatrix Keam is a Director for Centre of Automotive Research. I began by asking her how significant today's meeting between the Volkswagen Board and the Union was.

**Beatrix Keam** (2:16)
It is the start of a discussion where to go. And this will be, of course, a milestone for the German automotive industry.
As even Mercedes and BMW, they do have problems because the markets have changed, the cost structures have changed, the demands have changed. And I think to go even further, everybody from the established OEM side up to even the new competitors from China, all will have to change and to look into the structures, what to do going forward.

**Leanna Byrne** (2:46)
Beatrix, do you think this is really about long-term survival or is Volkswagen using the language of a crisis to force through cuts that unions have resisted for years?

**Beatrix Keam** (2:57)
That's actually one of the problems that unions have resisted for years, for even decades. When I was working at Volkswagen, you know, it's going down that the unions is having a say in salary increases even for people who are working in the tariff side.
It's not just your boss seeing that you're doing a good job and then giving you a pay rise that you can go forward and perhaps go even into management. In Germany and Volkswagen, the union have a say in this. Despite the fact that, of course, I do appreciate what they do for the workers, but sometimes they don't understand the impact of the overall global economic situation is something that has been building up for a long time, but then has, of course, had a higher impact in the last two years because of the Trump-Vance administrations, because of the changes in the Chinese market, because of the overall geopolitical circumstances, which make it even more important that we have now a long-term strategy outlook and a long-term structural change.

**Leanna Byrne** (4:03)
Is it also about Germany? You've got high costs, slow decision making, very complicated company structures sometimes. Can you just say it's a global issue or is it also an internal one too?

**Beatrix Keam** (4:14)
Yes, sometimes they say in contrast to China's speed that we take longer for decisions. It is about established companies, and I'm not talking only the automotive companies. They need to consider shareholder value. They need to consider safety and security for the consumers and not just going ahead and doing something to be on top one of the market, but they have to really consider what is the aftermath of their doing. And I think in Europe, we are rather tending to think twice before we do something. Sometimes, yes, perhaps a little bit too much and too slow. It is the complexity. It is that we do not have one government, like the US or China, saying what is to be done. It is in the EU.
We have a quite complex structure of the national government, of the EU government. If you have new economies, if you have new companies, they have perhaps more flat hierarchies, they have faster decision structures.