For much of its storied history, the German automaker Volkswagen (VLKAF) has been an industry innovator, icon and tour de force.
With a portfolio of well-known models, from the legendary Beetle to more modern cars like the Golf, Jetta, and Passat, VW has been a staple on driveways and city streets worldwide. In many countries, it remains a strong seller among stiff competition, including Japanese rivals like Toyota (TM) and Honda (HMC) .
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However, as the automotive industry in major markets like Europe and North America evolves to adopt electrified powertrains, hybrids, and electric vehicles to adapt to tighter and more restrictive emissions regulations, Volkswagen has been trying to adjust.
Though its U.S. lineup includes electric vehicles like the ID.4 crossover SUV, back in May, it paused the launch of the ID.7; an electric vehicle that was destined to replace the Passat sedan, citing unfavorable market conditions. While it has been confirmed that hybrid vehicles are being developed for the U.S. market, Volkswagen may have to let go of a key executive as it evaluates its future.
Pablo Di Si, president and CEO of Volkswagen Group of America
MediaNews Group/Orange County Register via Getty Images/Getty Images
According to reports by German news outlets Der Spiegel and Manager Magazin, as well as Automotive News, Volkswagen Group of America CEO Pablo Di Si is on his way out of the automaker.
The reports allege that Di Si, who has taken the helm from now-Scout Motors CEO Scott Keogh, is being blamed for missteps that predate his C-suite tenure. Specifically, the company has a bone to pick with the automaker’s poor performance in the United States, which it ties to lackluster sales of its EVs.
In its report, the Spiegel noted that Di Si wanted to use the shift to EVs as a platform to boost VW’s presence in the country, which was already raking in profits due to the semiconductor shortage during the pandemic.
However, Di Si set up profit expectations and inaccurately projected just how many EVs the company was actually going to sell; which soured the relationship between the regional CEO and the automaker. “You get such a job when you make big promises,” an unnamed company executive told Der Spiegel. “And you lose it again because you are unable to fulfill them.”
Spiegel reports that the company has three candidates to replace Di Si, but has only identified one: Stefan Mecha, VW’s current head in China.
In a statement to TheStreet, a representative from Volkswagen Group of America said that it does not have any additional comment on the matter.
An employee attaches a VW logo to a Volkswagen Golf in the final assembly line at the VW plant in Wolfsburg, Germany.
picture alliance/Getty Images
Volkswagen’s current trials
The potential shake-up at its American division comes as VW faces a crisis back in its native Germany.
At the same time it is negotiating a contract with the United Auto Workers at its Chattanooga factory, Volkswagen is facing scrutiny as it weighs decisions that will severely impact its relationship with labor unions in Germany.
According to a report by Autoblog, VW is set to close three of its German factories in a cost-cutting move that is set to save the company more than $4.3 billion.
Currently, it is behind on an $11 billion cost-cutting program to raise funds for critical investments, including a $5 billion investment for Tesla rival Rivian (RIVN) and a partnership with Chinese automaker Xpeng (XPEV) .
The news of the plant closures comes as Volkswagen’s Works Council head (the main liaison between the automaker and its workforce) announced 10% pay cuts, as well as a freeze on wage increases for two years; which has angered the IG Metall Union, the most prominent union and the union that represents the 100,000 workers VW employs in Germany.
The union has threatened retaliatory strikes in December if Vee-dub follows through on its moves.
“If VW confirms its dystopian path on Wednesday, the board must expect the corresponding consequences on our part,” IG Metall union negotiator Thorsten Groeger said.
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In its most recent earnings report, Volkswagen AG reported after-tax earnings losses of 63.7% as well as a sales dip of 8.3% worldwide.
In an interview with German newspaper Bild, Volkswagen AG CEO Oliver Blume blamed “structural problems at VW” that have lasted decades for the company’s latest woes, which include sales problems in key markets like Europe and China.
Additionally, he emphasized and justified the need for cost-cutting, as VW is in a unique position amongst other German rivals.
“Our labor costs [in Germany], for example, are often more than twice as high as the average for our European locations,” Blume said. “There is also a need for action in our development and sales costs and in other cost areas when compared to our competitors. The goal for cost and capacity adjustment has been set.”
VW AG’s HR head also echoed the cost-cutting agenda. He emphasized to Bild that the automaker’s German workforce must be “willing to accept cuts” to “tackle the restructuring quickly.”
Volkswagen AG, which trades on OTC markets as VLKAF, is currently trading at $99.08 per share.
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