Volkswagen is not closing plants due to Germany's support for Ukraine

The claim

A user on X claims that "Germany is dying for Ukraine," linking this statement to Volkswagen's recent decision to close several manufacturing plants for the first time in history. 

The post further alleges that "30% of plants will close, entire departments will be laid off at others, salaries will be reduced by 18%, with social benefits cancelled."

So far, the post – accompanied by a video clip from a Bloomberg TV report detailing Volkswagen's response to its current challenges – has reached over 889,000 users and received more than 4,800 shares.

However, to suggest that Germany's support for Ukraine is responsible for the challenges facing Volkswagen is misleading.

In fact

Volkswagen, Europe's largest automotive manufacturer and Germany's largest employer with over 670,000 employees globally, including nearly 300,000 in Germany, has announced plans to close at least three of its 10 German plants, representing approximately 30 percent of its domestic facilities. 

However, as part of the broader Volkswagen Group – which includes ten brands and operates 114 production sites worldwide – this reduction constitutes only about 2.6 percent of the Group's total facilities. The specific plants scheduled for closure have yet to be confirmed.

According to Daniela Cavallo, chair of Volkswagen's General and Group Works Council, the closures will lead to thousands of redundancies, the abolition of certain departments, and a 10 percent pay cut. With a two-year wage freeze, real wage cuts could indeed be as high as 18 percent.

Germany's support for Ukraine, including a recently announced €1.4 billion military aid package to be delivered by the end of 2024, is not connected to the challenges facing Volkswagen. While the German government has proposed to assist Volkswagen by enhancing the business environment and providing incentives for the transition to electric vehicles, there is no evidence that the aid to Ukraine will impact the nature or extent of support available to the company.

Volkswagen is facing significant challenges due to a combination of factors, with high energy prices—exacerbated by the Russian invasion of Ukraine—being just one of them. Additionally, declining demand, a slower-than-anticipated transition to electric vehicles, intense competition, particularly from Asian manufacturers, and rising operational costs are all exerting considerable pressure on the company.

"We are currently earning too little money from our cars. At the same time, our costs for energy, materials, and personnel have continued to rise. This calculation cannot work in the long term," stated Thomas Schäfer, CEO of Volkswagen Passenger Cars. He noted that VW is handling many tasks in-house that competitors have outsourced more efficiently.

The sharp decline in sales volumes led to a 63.7 percent year-on-year fall in third-quarter net profit, with revenues down 0.5 percent. The Group attributed this drop in profit mainly to a 7 percent fall in vehicle sales—growth in the Americas could not offset a 12 percent decline in China, where Volkswagen generates a third of its sales. In addition, rising fixed and restructuring costs, high energy and labor costs, and fierce competition from Asian manufacturers have prompted Volkswagen to consider $4.3 billion in cost cuts.

However, a Volkswagen spokesperson told Logically Facts that the company's situation is very tense and can't be fixed just by cutting costs. Germany's economic position is worsening, making it harder for Volkswagen to stay competitive. High energy costs, taxes, and political regulations are adding to the strain, while global competition is intensifying the challenge.

"In future, for example, around two million fewer vehicles will be sold in Europe across the industry than before coronavirus," they explained. "The Volkswagen Group, which has around a quarter of the market share in Europe, is therefore missing out on sales of around 500,000 cars."

Additionally, Volkswagen is grappling with internal issues: its German plants have more capacity than needed, and production costs in Germany are too high. The spokesperson emphasized that the company must focus on optimizing costs across several areas—products, materials, labor, and factory operations—and improving its sales performance to adapt to the challenging economic landscape.

The verdict

Higher energy prices following Russia's invasion of Ukraine add to Volkswagen's challenges. However, there is no evidence that Germany's support for Ukraine is linked to the company's planned plant closures in Germany.