Concerns over Germany’s economic slowdown, Volkswagen’s cutbacks, and stock performance rise as the far right gains support among workers.
Five years ago, things looked rosy and the future of the carmaker bright. Five years ago, former Chancellor Angela Merkel visited Zwickau in eastern Germany to inaugurate Volkswagen’s first electric vehicle-only factory, calling it the industry’s ‘flagship’ for transformation.
Now, things have turned for the worse. Last December, Volkswagen, its works council, and union IG Metall decided to reduce production at the plant during negotiations.
The deal postponed factory closures and layoffs until 2030. However, VW will halve its production capacity, and Zwickau and other factories will compete for investments.
Deal to cut 35,000 German jobs
On December 20, Reuters reported that Volkswagen announced major changes to its German operations. This included over 35,000 job cuts and capacity reductions, as the company negotiated with unions to avoid mass strikes.
Union leaders called the agreement a ‘Christmas miracle’ after 70 hours of negotiations. They decided against immediate site closures or layoffs.
The deal aimed to avoid costly strikes. After the negotiations, investors gained confidence, leading to a 2.4% rise in the carmaker’s stocks.
In 2024, Volkswagen’s stock lost 23%.
Volkswagen Group CEO Oliver Blume stated, ‘With the agreed measures, the company has set its course for the future in terms of costs, capacities, and structures.’
“We are now back in a position to successfully shape our own destiny.”
As a result, the negotiations would save VW 15 billion euros ($15.6 billion) annually in the medium term.
While VW announced no current closures, it stated that it would repurpose the Osnabrueck site and move some production to Mexico.
VW will terminate production at the Dresden plant by the end of 2025. At its largest plant in Wolfsburg, production will be reduced to two assembly lines instead of four.
Political uncertainty
The crisis at VW, along with turmoil among automakers, has come during a period of political and economic uncertainty in Germany.
Germany’s slow growth has been a key issue in the snap election campaign in February. Chancellor Olaf Scholz urged VW to keep all its factories open.
Regarding the deal, Scholz said, ‘Despite all the hardships, it ensures that Volkswagen and its employees can look forward to a good future.’
Alexander Krueger, chief economist at Hauck Aufhaeuser Lampe Privatbank, said the deal seemed to be a compromise both sides can accept.
“Other companies are also pursuing job-cutting plans, and VW appears to be just the beginning. Competitive price pressure will probably require further adjustments at a later date.”
The rise of the far right and Volkswagen
Volkswagen’s Zwickau Plant: From optimism to crisis
Volkswagen’s state-of-the-art plant in Zwickau was a symbol of Germany’s optimistic manufacturing future.
Now, it’s the place of Germany’s rising far right, which sees VW’s plant’s myriad problems including job cuts as an opportunity to attract voters and disaffected workers.
The AfD’s Influence on VW Workers
Lars Bochmann, a local politician from the far-right AfD party, said, ‘We want Volkswagen to pursue a market-oriented policy, not a planned economy.’ We experienced that here when it was East Germany.”
Bochmann worked at the Zwickau plant for nearly three decades before workers elected him to represent them in 2022.
Zentrum: An Alternative Labor Movement
Bochmann is leading an AfD effort to exploit workers’ dissatisfaction at VW and the broader automobile sector. The effort is part of the far-right organisation Zentrum, an ‘alternative labour movement.’
Zentrum aims to gain support from workers in major unions like IG Metall and Ver.di, linked to the centre-left Social Democratic Party.
Blaming EVs and Government Policies
Bochmann and his Zentrum colleagues blame VW’s turn towards electric vehicles and government subsidies for the company’s decline.
The Zwickau plant was VW’s first attempt to produce only electric vehicles, aiming to compete with U.S. and Chinese brands.
Workers’ Frustration and Disillusionment
Even workers who resist Zentrum’s propaganda feel nothing but disappointment and defeat about VW’s plant.
For the head of assembly at the plant Carsten Friedrich, “It feels like a personal defeat,” as “This is one of the deepest negative cuts I’ve experienced in 30 years of professional life at VW.”
Marc Stephan, the factory’s head of production, also expressed similar sentiment:
“People were told we represent the future, and now the next thing we know, production is cut in half. That’s hard for our people and creates dissatisfaction and, of course, openness to the populist spectrum.”
China-killer electric vehicle
Volkswagen has announced its plans for a “China-killer” electric vehicle (EV) that will only cost €20,000 (£16,700) in order to compete with Beijing-backed low-cost rivals.
The electric vehicle will go into production from 2027. The budget EV will compete with carmaker giants in China as it has long been the
leader in the EV market.
Chinese cars are extremely competitive. A new MG5 is less than £20,000 while BYD beat Tesla in UK sales last month.
VW CEO Thomas Schäfer praised the new EV as “an affordable, high-quality, profitable electric Volkswagen from Europe, for Europe”. He added that the German carmaker was well positioned in the field of all-electric battery electric vehicles (BEV), and that VW had sold more than 1.35 million ID. vehicles throughout the world, including about 500,000 ID.3.
Demand in Europe for EV cars declined in 2024, and it was down by 3% to 3 million due to costs as cheaper cars will likely see a massive increase in purchases.
As the German carmaker is planning to cut 35,000 jobs by 2030 due to a decline in demand and as competition from Chinese rivals grows, the future for Volkswagen remains uncertain.
Volkswagen Stock Prediction for 2025
Volkswagen’s stock performance in 2025 will likely be influenced by several key factors, including its transition to electric vehicles (EVs), global economic conditions, and political developments in Germany.
The company’s ability to compete with U.S. and Chinese EV manufacturers, manage production challenges, and adapt to shifting consumer demand will be critical.
Additionally, labor disputes and political tensions, particularly with the rise of the far right, could impact investor confidence. If Volkswagen successfully navigates these challenges and accelerates EV adoption, its stock may see moderate growth.
However, continued production cuts, declining sales, or macroeconomic downturns could pressure the stock further.
Descargo de responsabilidad: Esta información no se considera asesoramiento ni recomendación para invertir, sino que es una comunicación de marketing
