Daily Management Review

Volkswagen Could Cut Jobs If Pandemic Persist, Burning $2.2 Billion A Week


Volkswagen Could Cut Jobs If Pandemic Persist, Burning $2.2 Billion A Week
The largest auto maker of the world Volkswagen has said that it is burning out about 2 billion euros ($2.2 billion) a week and the German auto group’s Chief Executive Herbert Diess told German TV channel ZDF that if the coronavirus pandemic is not brought under control soon enough, it might need to cut jobs to save money.
No sale was being made by the company outside of China and therefore was looking out ways and means to resume restart production at places where its staff would not be in danger of the coronavirus infection, Diess told the Markus Lanz talkshow. The German auto giant has a total of more than 671,000 employees globally.
“We need to rethink production. The discipline which we had in China we do not yet have at our German locations,” he said. “Only if we, like China, Korea or other Asian states, get the problem under control then we have a chance to come through the crisis without job losses. It requires a very sharp intervention,” Diess said.
He said that even though there has been an uptick in demand in China, the company is currently about to manufacture at only at about half of what it could before the pandemic crisis.
There are 124 factories of the company all across the world with 72 in Europe alone out of which 28 are in Germany. The spread of the coronavirus pandemic forced the company to close all its European factories this month.
Diess said that the company was devising ways of safety for its workers after it reopens production with measures such as workers maintaining safe distances from one another while also taking other measures such as disinfecting and ensuring good hand hygiene for the workers.
“We are not making sales or revenues outside of China,” Diess, adding that Volkswagen still had to cover a high level of fixed costs of “around 2 billion euros a week”, he told ZDF late on Thursday.
More than 10.96 vehicles were sold last year by the carmaker, which is the owner of the Audi, Bentley, Bugatti, Lamborghini, Porsche, Seat and Skoda brands as well as the Ducati motorbikes and MAN and Scania truck brands.
In a separate report published on Friday by the Financial Times, a call on the European Central Bank (ECB) to accelerate purchases of short-term debt was given by VW’s Chief Financial Officer Frank Witter.
In addition to sending "clear signals", the ECB also needs to purchase short-term debt "as soon as possible", he said. Such debts typically matures in as little as six or nine months.
While announcing a 750 billion euro plan to boost asset purchases to prevent a financial fallout from the coronavirus pandemic, The ECB also announced last week that it would be purchasing commercial paper among other measures to spruce up the economy.
Whether the ECB has started buying commercial paper is not clear. One of the most regular issuers of commercial paper in Europe is VW.
“There’s a lot of pressure on the incoming money flow,” said Witter. “We have different diversified funding sources available but not all of them are as liquid as they were.”