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GERMANY: VW Travails Play Outsized Role In Political Landscape Ahead Of Election

GERMANY
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Daniele Cavallo, the chair of the General and Group Works Council at Volkswagen, has been talking about the troubles facing the carmaker. Cavallo says 'The board assumes that in all scenarios there will be factory closures', and that 'the factories which remain will have [a] significant reduction in capacity'. Given an early federal election is approaching in February 2025 there is a significant political dimension to the decisions by VW and the German gov't. 

  • VW operates 10 plants in Germany at present, six of which are in Lower Saxony, three in Saxony and one in Hesse. The current plans would see this reduced to seven, with all remaining plants smaller in size. As Politico reports, "In the state of Lower Saxony, which owns a fifth of VW, both the government and the opposition are insisting that the company not shut any factories. Stephan Weil, the Social Democratic Party premier, insisted that VW figure out a solution that doesn't involve layoffs."
  • It is not just lawmakers representing constituencies where factories are located that could feel the political effects. The German auto sector retains a prominent place in public perceptions regarding the health of the country's economy. As such, the very public travails of VW risk exacerbating the backlash against the incumbent parties of gov't.
  • Indeed, Economy Minister Robert Habeck's Greens have faced severe criticism from the conservative Christian Democratic Union, labelled by the CDU as "the embodiment of regulation and bureaucracy that impacts citizens and businesses". 
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Daniele Cavallo, the chair of the General and Group Works Council at Volkswagen, has been talking about the troubles facing the carmaker. Cavallo says 'The board assumes that in all scenarios there will be factory closures', and that 'the factories which remain will have [a] significant reduction in capacity'. Given an early federal election is approaching in February 2025 there is a significant political dimension to the decisions by VW and the German gov't. 

  • VW operates 10 plants in Germany at present, six of which are in Lower Saxony, three in Saxony and one in Hesse. The current plans would see this reduced to seven, with all remaining plants smaller in size. As Politico reports, "In the state of Lower Saxony, which owns a fifth of VW, both the government and the opposition are insisting that the company not shut any factories. Stephan Weil, the Social Democratic Party premier, insisted that VW figure out a solution that doesn't involve layoffs."
  • It is not just lawmakers representing constituencies where factories are located that could feel the political effects. The German auto sector retains a prominent place in public perceptions regarding the health of the country's economy. As such, the very public travails of VW risk exacerbating the backlash against the incumbent parties of gov't.
  • Indeed, Economy Minister Robert Habeck's Greens have faced severe criticism from the conservative Christian Democratic Union, labelled by the CDU as "the embodiment of regulation and bureaucracy that impacts citizens and businesses".