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Bad Business in the U.S.
Volkswagen Facing Yet Another Crisis
VW was hoping to rake in billions in profits from its U.S. operations. Now, though, it is looking like the company's all-electric plan for the region will create steep losses instead.
By Alexander Demling
01.11.2024, 14.13 Uhr
Kompletan tekst
https://www.spiegel.de/international/bu ... af38cb5c28
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On an unusually sunny day in the middle of October, Pablo Di Si is standing on the steep and narrow Lombard Street in San Francisco. Behind Di Si, the president and CEO of Volkswagen Group of America, a line of colorful buses is winding down the street, well-known from a number of Hollywood car-chase scenes. The auto executive posts the photo on LinkedIn. It is, after all, a big day for the company. VW is celebrating the release of the electric minivan ID.Buzz in the U.S., and in interviews, Di Si reflects on the largest sunroof that Volkswagen has on offer. It is to be a new beginning.
The article you are reading originally appeared in German in issue 44/2024 (October 26th, 2024) of DER SPIEGEL.
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At VW headquarters, Di Si is seen as being partially culpable for the company’s biggest crisis since the diesel scandal. The fact that the company is terminating its in-house wage agreements for its sites in western Germany and is on the verge of closing plants in Germany for the first time in its history is also linked to the company’s missteps in the U.S.
More than a billion euros of expected earnings from North America will be missing by 2025, with Thomas Schäfer, the CEO of VW’s passenger car operations, having to scrounge up that money elsewhere. Chairman of the Board Oliver Blume, who declared success in North America to be a company priority, now has to begin looking around for a new executive for the region after just two years.
A Mountain of Problems
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In comparison to the markets in Europe and China, the VW presence in America is tiny. But since 2021, the region has been consistently generating profits, and its returns have also been consistently ahead of the average for the rest of the world over the last two years. After many years of generating multibillion-dollar losses, the VW brand was able to send around a billion dollars to headquarters in Wolfsburg in 2022, from total sales of almost $20 billion.
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The biggest one stretched back to before Di Si’s tenure: VW’s all-in wager on electric cars proved to have been massively misguided. The German company is making profits in North America with gas-guzzlers like the huge SUV Atlas, a vehicle which – at five meters in length and 1.8 meter high – is clunkier than any SUV the company sells in Europe. By contrast, sales of purely electric cars like the ID.4, which VW builds in its Tennessee plant, have been relatively slow.
VW's CO2 Problems
But the administration of U.S. President Joe Biden has stiffened the rules regarding how much gas a passenger car is allowed to burn, starting next year.
The situation promises to be particularly challenging for VW in California, the largest car market in the U.S., where the rules are even stricter than in the rest of the country: Starting with model year 2026, which begins about a year from now, 35 percent of carmakers’ sales will have to be so-called Zero Emissions Vehicles (ZEV), or they will have to buy pollution certificates from electric-only companies like Tesla. Currently, VW is roughly 10 percentage points from the 35-percent target.
In an effort to limit the approaching penalties and ensure that profits at least remain above zero, VW’s U.S. headquarters in Reston have begun calculating which combustion automobiles they will have to limit without sacrificing too much profit.
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Plug-in hybrids, meanwhile, were predicted to make up 20 percent of new car sales by the end of the decade. Such vehicles, which have both a medium-sized battery and a combustion engine, also
help producers adhere to the ZEV regulations in California.
In the coming years, however, VW will not have a single plug-in hybrid model on the U.S. market. "The cupboards are bare,” says a top executive.
Only in model year 2028 will a plug-in version of the SUV Tiguan be introduced, the U.S. version of which will, of course, be larger than its European namesake. As a next step, the North American branch of VW intends to create a hybrid version of the Atlas, its most profitable model, but that wouldn’t likely hit the market until 2030.
In Wolfsburg, executives are wondering whether the hybrid trend in the U.S. may have dissipated by then. Either way, the American branch brought the troubles on itself; in Europe, VW has a broad palette of such vehicles.
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"Wolfsburg Speed" instead of "China Speed"
Nevertheless, the hybrid is only coming five years from now. "Wolfsburg speed,” a U.S. executive says derogatorily, a reference to the "China speed” that Blume has recently propagated as the company’s goal.
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VW in the U.S. is facing three "years of hunger,” says one insider. Blume is now looking for an experienced salesperson who might be able to boost the sales of electric cars during this challenging period. Given the problems the company is facing, the position isn’t exactly a dream job. Currently, the list is thought to include three candidates. One of those is Stefan Mecha, one of the leading globetrotters in VW’s global empire and someone who has close ties with the protagonists in the company’s current struggles. Mecha worked as a sales executive under Schäfer in South Africa and also served under Di Si in Brazil.
And Mecha is intimately familiar with crisis: Prior to his current position as head of the VW brand in China, Mecha was responsible for winding down
