Ford's joint venture partner VW seems to be in dire straits lately

[Joe771476]

I've been reading a lot of news articles on VW's woes. But I can't understand how it can cost $18.5 billion to CUT jobs and CLOSE factories! I'd hate to see the price tag for hiring workers and opening factories!

 

Volkswagen To Spend $18.6 Billion On Job-Cutting, Factory-Shuttering Restructuring

[akirby]

Severance pay, pensions, asset writeoffs, lease buyouts, taxes, HR..... etc etc

 

A lot of it is paper losses.

[Joe771476]

3 hours ago, akirby said:

Severance pay, pensions, asset writeoffs, lease buyouts, taxes, HR..... etc etc

 

A lot of it is paper losses.

Yeah I get it, and therefore a tax deduction!

[jpd80]

5 hours ago, Joe771476 said:

Yeah I get it, and therefore a tax deduction!

Also, this is the perception that VW Group board members are willing to accept today,

stemming today’s losses also does nothing to improve competing against the Chinese.

 

VW execs have been warning that the group has too many of everything for years,

I think this is only the beginning of a downward trend…cheaper vehicles or go bankrupt.

[Harley Lover]

 

[Zestyg]

Aside from the direct costs of physically shutting a plant down, closing a factory means it and the fixed capital inside’s value as an asset plummets. This is a loss that won’t be realized until you sell what remains of the asset. You also cancel supplier contracts which incurs monetary costs. Cancelling product development means everything invested into that program goes to zero, firing workers costs severance etc.

 

Volkswagen/VAG had a business model where they built shit in Germany and exported it everywhere else. This worked because of free trade and all costs (shipping, energy, etc) were cheap. The recent geopolitical developments in trade, the Middle East, and Russia/Ukraine have specifically made all of these factors turn completely against the model of building things in Germany and exporting globally. Combined with VAG incompetence in the US and China, you run into their current situation of having like 100 redundant models, employing 2x the amount of workers Toyota does, all located in a country that is suddenly not very good to build cars in, bringing in the same amount of revenue as Toyota does. 
 

This additional 50k cuts feels a bit luxurious, chasing a profit margin for the sake of the profit margin. But overall their business model had a perfect storm (a lot of which was their own poor decision making) and now they have to shift towards a more localized production system with a leaner, focused, localized product range. They would probably like to be like Toyota but are more likely to end up like Ford, GM, Renault. Worst case scenario they become like Stellantis where you have a core that doesn’t suck (Fiat, Jeep, Ram) and a lot of bullshit that does suck (everything else) but unlike Stellantis they are probably cutting useless brands like SEAT, selling Ducati, getting out of Bugatti, and so on. 

[Zestyg]

14 hours ago, jpd80 said:

stemming today’s losses also does nothing to improve competing against the Chinese.

This is true but it does help them avoid the Stellantis disease. That would weigh down any positive changes they make elsewhere. Ironically unlike Stellantis, VAG has the opposite issue where Skoda/Lambo/Bentley are weighed down by VW/Audi/Porsche. 

[7Mary3]

I could see VAG unloading what they still hold of Traton soon too.  I think VAG will muddle through, but will emerge much smaller and more efficient.  I don't think there is any hope for Stellantis, I just hope they sell off CDJR before it crashes.

[Motorpsychology]

11 hours ago, 7Mary3 said:

I could see VAG unloading what they still hold of Traton soon too.  I think VAG will muddle through, but will emerge much smaller and more efficient.  I don't think there is any hope for Stellantis, I just hope they sell off CDJR before it crashes.

Might it go the other way? Make Stellantis NA-centric, shutter the Euro brands which are marginally profitable as the Chinese invasion inexorably eats up that market and concentrate on this market. Maybe it becomes Chrysler Corporation once again.

[jpd80]

The permanent loss of sales volume and market percentage is going to severely impact 

its future financing conditions - who wants to lend money to a company that continues

to lose revenue, sales and profit…

Edited September 15 by jpd80

[Joe771476]

Porsche's decline from crown jewel to millstone for parent Volkswagen | Reuters

[akirby]

2 hours ago, Joe771476 said:

Porsche's decline from crown jewel to millstone for parent Volkswagen | Reuters

Taycan was a flop.  They killed their most affordable sports cars boxster and cayman.  Their EV replacements aren't here yet and who knows if they'll even sell.  They jacked up prices on 911s.  China market crashed.  Tariffs on US imports.