Volkswagen forced to stop production again due to lack of demand

The German automotive group will interrupt for a few days certain assembly lines, notably those of the Golf and Tiguan models, which have just been reopened, due to weak automotive demand.

Volkswagen resumed production in late April in Germany after weeks of shutdown due to the coronavirus pandemic. In its factory at the historic headquarters in Wolfsburg, two assembly lines will however be completely closed again, and a third will see its hours reduced, for four days this May, because demand does not follow production.

The interruption concerns in particular the Golf and Tiguan models. It is for the manufacturer “to continuously align production with expected market fluctuations”. These temporary closings indeed illustrate the difficulty of restarting in Europe after the restrictions linked to the pandemic, which have already led to historic falls in March and April in European car sales.

35,000 workers still on partial unemployment

“Customers are not interested in buying cars and the depots where the produced vehicles are stored are already reaching their limits”, had already warned at the end of April by the president of the powerful works council which also sits on the board group monitoring. “The entry of orders is distressing”.

The Wolfsburg plant is expected to produce some 6,000 cars per week at first, or 40% of its capacity, while more generally in Europe, Volkswagen factories are currently operating between 35 and 50% of the maximum.

A “flexible approach” will still be necessary for “an extended period of time,” explains the manufacturer, while 35,000 group employees are still partially unemployed in Germany. “As long as there is no work for everyone due from the situation on the markets, partial unemployment remains necessary”.

100,000 jobs related to the automotive sector

To boost sales, manufacturers and equipment manufacturers are trying to obtain from the government a new aid program similar to the purchase premiums introduced after the 2008–2009 financial crisis, but criticized for environmental reasons.

A meeting around Angela Merkel in early May was unsuccessful, but working groups must present ideas by early June. The crisis in the automotive sector, the pillar of the German economy, threatens 100,000 jobs in Germany in the long term, according to an industry expert from St Gallen University.

Moody’s lowered its forecast for the global automotive market on Wednesday, and now expects sales to drop 20% in 2020, including a 30% dip in Europe and 25% in the United States. The Chinese market should be better (-10%).

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