Auto – VW management reportedly overwhelmed by corona virus

The start of the Golf messed up, problems with the new ID.3 electric car – and now Corona too: things are not going well in Wolfsburg. What exactly are the problems at VW? And what will be left of our auto industry after the pandemic is over?

Horror on a reckless and weak board, start of the new misguided Golf, figures so far a tragedy: Powerful VW works council chief Bernd Osterloh fired hard at group management last week. Apparently there are a lot of problems in Wolfsburg right now.

To spoil Market launch of the Golf 8 come on persistent problems with the electric car ID.3. And now Corona too. For two weeks, maybe three, the belts of European VW factories have stood still – for now. As you can hear, also under pressure from the staff, who no longer wanted to see the management come to the home office, while still working side by side on the assembly line.

What exactly is going on at VW? How will the company cope with the corona crisis? And what will the pandemic leave for our entire auto industry? This explains self insider Stefan Randak of management consulting firm Atreus in an interview with t-online.de.

Stefan Randak: VW management is obviously overwhelmed, says the automotive expert. (Source: Atreus GmbH)

t-online.de: Due to Corona, VW stops production at its European factories. So also in Zwickau, where the ID.3 is built. The new electric car is expected to hit the market this summer, VW continues to adhere to it. Insiders have had doubts about this for some time. Does VW have blue eyes to continue to meet this schedule despite all the ambiguities?

Stefan Randak: Possible delays were already circulating before the corona virus. The deciding factor in this context will not be what you want to program, but how the facts evolve. If production and the supply chain are disrupted, they cannot be manufactured or delivered. It’s as simple as that: the desired appointments are no longer tenable.

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Questionable ID.3 start and messed up golf start: In addition to Corona, the squad have a whole host of house issues. What is wrong with Wolfsburg?

Two highlights at the same time, the Golf 8 and the ID.3, obviously overwhelm the management. There are also errors in electronic and software components and delays in IEquipment T. However, not all of these components are developed or manufactured by VW alone. Problems are therefore not entirely homemade, but must be systematically addressed as quickly as possible. That would be my urgent call.

Osterloh called the board “careless and weak,” criticized the lack of social skills in parts of the leadership. Isn’t VW group management up to the task?

Proven crisis management has become rare. The last ten years have been characterized by a massive upward trend in the classic environment i.e. classic driving, classic infotainment. The current operational leadership team – also below the board – is now experiencing for the first time the biggest restructuring ever in the automotive world: alternative drives, automotive connectivity, complex new start-ups, falling sales and now Corona. Some managers are overwhelmed.

At the moment, of course, no one knows how long the corona crisis will last. However, the auto industry has adapted to different scenarios and calculated its costs. What damage will Corona cause to industry?

We are already seeing that there will be production stoppages and a drop in global sales. The profit margins of the so far successful large manufacturers are expected to decline by more than half, from the current eight to ten percent, and to around two to four percent. A quarter of the supplier industry is already in medium to high difficulty – depending on the product portfolio and the degree of dependence on certain manufacturers. There will be significant thinning processes over the next twelve months.

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How long will it take for the industry to recover from the crisis?

It just depends on the extent to which the corona virus spreads and thus negatively affects production and the supply chain. Manufacturing in Asia is currently recovering, Europe is in the middle of the corona crisis and is closing its factories. Factories on the American continents – in the United States and Mexico – will follow shortly. There are also negative consequences on vehicle sales. I currently assume that the negative impact of the coronavirus will continue for at least twelve months.

Corona won’t blow up a giant like VW. Others are less padded. For which companies in the automotive industry is Corona the most dangerous?

Areas that are part of a global supply chain or that manufacture “just-in-time” or “just-in-sequence” are particularly at risk *. Large companies, that is, powerful manufacturers and suppliers, are better able to handle temporarily manageable shutdowns due to their size. Small businesses – mid-sized businesses and small suppliers – that have struggled over the past six months due to the downward trend in the auto industry are now entering the red zone.

* Delivery of parts when they are needed. The supplier stores the parts and bears the corresponding costs.

The Chinese auto market fell nearly 80% in February due to Corona. What are your expectations for Europe?

Depending on the strength and duration of social and economic “corona restrictions”, similar declines can be expected. Europe is well mobilized. First and foremost, it is always a question of acquiring replacements, who are of course placed behind social and economic charges. In addition, the sales bases in the main European countries are currently closed.

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Your outlook: what will the auto industry look like after Corona?

A capacity adjustment was announced before Corona. Corona will reinforce this need. In this regard, I now expect a significant adjustment in global production capacities and, consequently, fewer jobs. Global supply chains will also need to be reviewed and reorganized. Storage and supplier sourcing should be reviewed; companies already affected will exit the market on sight.

Of course – especially in this time of crisis – there are more important questions than waiting for a new car. Nevertheless: what does Corona really mean for customers?

As production and supply chains are disrupted, wait times will certainly be longer.

New car buyers are used to high discounts. Will these discounts also decrease because of the decrease in the supply of new cars? Are cars therefore becoming more expensive?

I do not think so.

What’s your advice for anyone interested in a new car?

If you order now, you will have to wait a long time. For short-term delivery and a good price, a show, demonstration or annual car is therefore always recommended.

Thanks for the interview, Mr. Randak.

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