Herbert Diess is worried. Why? Because the Volkswagen Group CEO sees Tesla and a host of Chinese car companies in the rear-view mirror and moving up fast. Last Thursday, he and Ralf Brandstätter, head of the Volkswagen brand, held a meeting with 120 senior managers at the company’s primary factory in Wolfsburg. Their message was clear — Volkswagen risks falling behind the competition unless it makes big changes in its manufacturing facilities. “We have great responsibility for this location,” Diess said. “We have to accept the new competition. We need the will to live and a jolt at this location.”
According to Business Insider, Diess said Tesla and many Chinese manufacturers are now producing cars cheaper and faster. The quality of their vehicles is getting better and now rivals European standards. According to Kearney, a management consultancy, more than 70% of Chinese customers plan to buy their next premium vehicle from a Chinese manufacturer because they make top quality vehicles at an affordable price. German models like the ID.4 simply can’t keep up.
To remain competitive, Diess is prescribing what can only be described as open heart surgery for the main factory in Wolfsburg. Old buildings will need to be demolished and new production halls built in order to make the manufacturing process more efficient.
Brandstätter agrees. He says there is an urgent necessity to improving the Wolfsburg factory to meet the competition from Tesla at its new factory in Grüneheide, where a Model 3 takes only 10 hours to build. An ID. 3 built at Zwickau reportedly takes three times longer to manufacture, according to leaks from the executive meeting.
Volkswagen is still doing well in its home market, where its cars account for 6 spots on the top 10 sales ladder. Take Germany out of the picture, however, and there is no longer a single Volkswagen product in the European top 10 leaderboard.
Wolfsburg is supposed to be the place where the upmarket electric cars from Volkswagen are produced starting in 2026. Those vehicles will be part of what the company calls its Trinity project — the platform that will do for larger vehicles what the MEB platform is doing for ID. branded cars.
Diess told those 120 managers in the audience last week, “Trinity has to raise the location to a new competitive level, has to revolutionize it. Even with new processes.” He added that the current plans for the Trinity project don’t go far enough and that more radical solutions will be needed to save the Wolfsburg location.
“In the end, it’s also about the jobs that we have here. Mr. Diess, the supervisory board, or the employee representatives do not decide on the jobs. The customer decides about this and the customer buys the product that offers more quality, more features for a better price. That is why we have to take up the fight, attack and not let Grünheide destroy our location.”
The Role Of Labor
Diess knows for his vision to succeed, he will need the works council — the German equivalent to the UAW in the US — on his side. He had a stormy relationship with Bernd Osterloh, the head of the works council, in the past. The fact that Rolf Brandstätter was on the stage with him at this important meeting was a sign to the workers that their interests will not be ignored. He has maintained a good relationship with the works council over the years.
Osterloh has moved on. The new works council head is Daniela Carvallo. Her primary concern is that disruptions in supply chains — particularly when it comes to the computer chips so essential to all modern automobiles — have hobbled production at the Wolfsburg factory. As a result, many workers have seen their hours cut. Electric cars are less dependent on the chips that are typically used to build conventional cars, so Carvallo is anxious to see the company move up its electric car plans so that her people can get back to full work weeks sooner.
According to Reuters, there are reports in the German press that Carvallo would like to see production of the electric cars that are part of the Trinity program — beginning with a large luxury sedan — go into production in 2024, two years sooner than the target date the company has had in mind. “The site needs a faster path to e-mobility,” she told the press recently.
And What Of The Others?
If Volkswagen Group, which knows a thing or two about making automobiles and is only trailing Tesla in plugin vehicle production globally, is feeling the hot breath of the competition on its neck, what must other companies be thinking? Have we heard similar statements from them about ripping down factories and building new ones to boost efficiency and lower costs?
Henrik Fisker is all excited about Foxconn buying the former factory that Lordstown Motors bought from GM a few years ago. He says it is the ideal place to build his “personal electric automotive revolution” vehicle planned for 2024. Really? A clapped out factory GM had no further use for (it built Vegas there 50 years ago)? Foxconn, who knows nothing about building anything but smartphones? That’s the best you’ve got, Henrik? Can you say “delusional,” boys and girls?
Speaking of delusional, how about Toyota, whose head honcho is doing his best to destroy the company his grandfather created. He thinks Brand T will still be selling “self charging electric cars” — a.k.a hybrids — in the year 2929. Does it have any plans to stave off the competition from Tesla and the Chinese manufacturers? If so, it is a heavily guarded secret that Akio Toyoda has shared with no one up until now. Instead, his strategy is to rant about how electric cars will destroy the Japanese economy. Doesn’t get more forward thinking than that, does it?
When I started driving, Plymouth and Pontiac were two of the more popular brands in the automotive world. Today, half of all Americans have never heard of either one. What familiar brands today are likely to be gone tomorrow? The chances are several are headed straight into the dustbin of history as better made, less expensive cars — many of them from China — come ashore in countries all around the world.
Herbert Diess has a plan for competing head to head with Tesla and the Chinese companies. Those other companies? Not so much.
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