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Volkswagen says it could close plant in Germany for the first time ever
Volkswagen says auto industry headwinds mean the German automaker can’t rule out plant closings in its home country, while the company is also dropping a longstanding job protection pledge that would have barred layoffs through 2029.
“The European automotive industry is in a very demanding and serious situation,” Oliver Blume, Volkswagen Group CEO, said in a statement Monday.
He cited new competitors entering the European markets, Germany’s deteriorating position as a manufacturing location and the need to “act decisively.”
A Volkwagen plant closure in Germany would mark the first time the automaker, which was formed in 1937, had closed a domestic factory, according to Bloomberg News. It would also be the first time the company had shuttered any of its manufacturing plants since its U.S. facility in Westmoreland, Pennsylvania, closed in 1988, the dpa news agency reported.
Thomas Schaefer, the CEO of the Volkswagen Passenger Cars division, said efforts to reduce costs were “yielding results” but that the “headwinds have become significantly stronger.”
Mounting competition from China
European automakers are facing increased competition from inexpensive Chinese electric cars. Volkswagen’s half-year results indicate it will not achieve its target for 10 billion euros ($11 billion) in cost savings by 2026, the company said.
The discussion around closures and layoffs is for the company’s core Volkswagen brand. The brand saw operating earnings sag to 966 million euros ($1.1 billion) from 1.64 billion euros in the year-earlier period.
The group also includes luxury makes Audi and Porsche, which have higher profit margins than the mass-market vehicles made by Volkswagen, as well as SEAT and Skoda.
The company has sought to cut costs through early retirements and buyouts that avoid forced layoffs, but is now saying those measures may not be enough. Volkswagen has some 120,000 workers in Germany.
Union officials and worker representatives attacked the idea of closings or layoffs. Management’s approach is “not only shortsighted, but dangerous, as it risks destroying the heart of Volkswagen,” Thorsten Groeger, chief negotiator with VW for the IG Metall industrial union, said on the union’s website.
Top employee representative Daniela Cavallo said that “management has failed… The consequence is an attack on our employees, our locations and our labor agreements. There will be no plant closings with us.”
The governor of Germany’s Lower Saxony region, Stephan Weil, who sits on the company’s board of directors, agreed the company needed to take action but called on Volkswagen to avoid plant closings by relying on alternative ways to reduce costs: “The state government will pay particularly close attention to that,” he said in a statement reported by the dpa news agency.
The European Union in July moved to impose provisional tariffs on Chinese EVs, although the EU will only collect the levies if talks with Beijing fail to yield a trade deal. The levies would consist of 17.4% on cars from BYD, 19.9% from Geely and 37.6% for vehicles exported by China’s state-owned SAIC. Geely’s brands include Polestar and Sweden’s Volvo, while SAIC owns Britain’s MG.
President Joe Biden in May announced tariffs of up to 100% on Chinese EVs, quadrupling the current tariff of 25%.
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Americans are expected to spend more money heating their homes this winter than on holiday gifts, according to new research.
The elevated cost of staying warm indoors amid cold outdoor temperatures comes after an unusually hot summer, that led to households spending bigger shares of their budgets on cooling costs, compared with previous years, according to a report from the National Energy Assistance Directors Association (NEADA).
On average, spending on home heating this winter is projected to increase by 8.7% to $941, up from $866 last winter. The increased costs are attributed in part to both expected colder temperatures in the Northeast and Midwest states.
The new average expenditure on heating costs outpaces the $902 the average household is expected to spend on Christmas presents this year, according to a forecast from the National Retail Federation.
What’s driving up home heating costs?
There are different ways to keep residences warm. Families that use electricity to heat their homes are expected to face the largest increase in costs — more than 14% — which will bring the total up to $1,189 from $1,040 from mid-November through mid-March, which NEADA considers to be the winter period.
Driving up prices is the rising cost of updating and maintaining the electric grid. Plus, colder weather is expected to lead to increased consumption.
“It’s colder, and the cost of electricity is up as the grid is rebuilt. So we’re seeing both higher prices and greater usage,” NEADA Executive Director Mark Wolfe told CBS MoneyWatch.
Natural gas, propane and heating oil cost differences
Natural gas and propane users are also expected to be hit with bigger bills this winter. Heating costs for natural gas are up just over 3%, for an average cost of $634 for the winter period, compared with $615 for 2023-2024. Costs are expected to rise only modestly in line with wholesale prices.
Propane costs are up 4.4%, with families expected to spend an average of $1,231 heating homes, up from $1,179 last season.
Heating oil costs, by contrast, have declined 2.7%, which means average spending this winter will be $1,518, down from $1,560 last winter.
Early start to the season
November was colder than usual, with temperatures dropping prematurely after a “very expensive summer” of heat waves straining cooling resources, said Wolfe.
Blame climate change for the big swings in temperature, he added.
“Weather conditions can be very unpredictable even though over time, winters are getting warmer and summers are getting hotter. It’s not a straight line, and for consumers, it’s quite upsetting because higher utility bills are coming right before Christmas,” Wolfe said.
Steps to take now
There are steps consumers can take to help keep a lid on home heating costs.
Wolfe urges people to have their thermostats serviced now, before the coldest temperatures of the season roll in. That way, families won’t be on the hook for an emergency repair if their thermostat breaks in the middle of a cold front. A tune-up will also help heating systems run more efficiently, he said.
Always close the furnace flue, or else it will lead heat outside the house, advises Wolfe. Lastly, manually turn down the heat at night, if you can, to save up to 10% on your energy bill.
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