A few days ago, a news story landed in my inbox claiming that Volkswagen CEO Herbert Diess had warned company managers that the transition to electric cars would result in the loss of 30,000 jobs. I read the story a couple of times and never quite fully understood it, so I decided to put it aside and revisit it later.
I’m glad I did. Today, Reuters has clarified the “who said what and when” situation. The real story is not totally different but is not quite what was stated in the original report either. Here’s what Reuters is saying today: “Volkswagen’s CEO Herbert Diess told a supervisory board meeting in September that the company could lose 30,000 jobs if it transitioned too slowly to electric vehicles (emphasis added), two sources with knowledge of the matter told Reuters on Wednesday.”
It’s a subtle but important distinction. Diess didn’t say EVs would lead to a loss of 30,000 jobs. He said that if the company’s transition to EVs did not proceed fast enough, there could be significant job losses. Competition from Tesla and Chinese companies that are entering the German new car market requires Volkswagen to speed up its transition to electric cars and become more efficient at building them.
A company spokesperson confirmed Diess’ position that the presence of Tesla and others in Germany heightened the urgency of transitioning to EVs, but denied that specific calculations had been made on how many jobs could be lost in the process. To date, the company has made every effort to treat its workers fairly during the transition period.
Tesla plans to produce 500,000 cars a year in Germany with a workforce of 12,000 employees. By contrast, at Volkswagen’s Wolfsburg factory, the company manufacturers more cars — about 700,000 a year — but needs twice as many workers to do so. Recently, we covered another aspect of Diess’ discussion with 120 senior managers in which he called for a drastic modernization of the Wolfsburg factory — Volkswagen’s largest production facility — in order to improve productivity in advance of the next wave of electric cars from VW as part of its Trinity program.
“There is no question that we have to address the competitiveness of our plant in Wolfsburg in view of new market entrants,” Volkswagen spokesperson Michael Manske told the press this week. “Tesla is setting new standards for productivity and scale in Grunheide. A debate is now underway and there are already many good ideas. There are no concrete scenarios,” he added.
A spokesperson for Volkswagen’s workers’ council — similar to the UAW in the US — would not comment on whether Diess made the remarks attributed to him but stated “a reduction of 30,000 jobs is absurd and baseless.” Another union spokesperson from the region of Lower-Saxony, which is Volkswagen’s second-largest shareholder, said such cuts were “out of the question.”
The issue of job losses is a frequent topic of discussion when it comes to electric cars. They have far fewer moving parts (there can be over 10,000 of them in the powertrain of a conventional car between the engine, transmission, and differential). Fewer pieces to fit together means fewer assembly workers are required.
And yet, Ford has just announced it is hiring almost 11,000 new workers for its new electric truck assembly plant in Tennessee and battery factory in Kentucky. Those who warn of job losses often fail to mention that new employment opportunities are being created in other areas.
New Volkswagen IPOs
In other news, Volkswagen CTO Thomas Schmall says the company is exploring a new stock offering for its battery division and could spin off other investment opportunities in EV charging and its energy business. Schmall said nothing had been decided yet and it would probably take up to two years before the new companies were established and ready for the stock market.
The car business is changing and manufacturers will need to change with it if they want to maximize profits in the future. Subscription services and other new financial products will be part of those changes.
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