VW warns it has ‘a year, maybe two’ to adapt to lower demand
German carmaker Volkswagen has warned its staff that it has “one, maybe two” years to cut its spending and adjust its output to lower demand, as it ponders shutting factories in Germany for the first time.
At a briefing with staff this morning, VW warned that its main brand needs to make deep cost cuts if it is to succeed in the transition to electric cars.
Chief financial officer Arno Antlitz told workers, gathered at Volkswagen’s Wolfsburg headquarters:
“If we carry on like this, we won’t succeed in the transformation.
It is our joint responsibility to improve the cost efficiency of the German sites.”
Antlitz warned that Europe’s car market had shrunk after the pandemic and the company was facing a shortfall in demand of about 500,000 cars, equivalent to about two plants.
But the meeting was stormy – Reuters reports that staff whistled and shouted “Auf Wiedersehen” when Antlitz took to the stage.
On Monday, VW warned that it was considering shutting two German factories, in what would be the carmaker’s first closures ever in its home country.
VW’s problems show the difficulties traditional European carmakers are having in switching from profitable but polluting petrol and diesel cars to cleaner but currently less profitable electric vehicles.
VW’s unions, though, are resisting efforts to close plants in Germany.
Daniela Cavallo, head of Volkswagen’s works council, told workers at the carmaker’s main plant in Wolfsburg that management had failed to do its job and needed to come up with a plan without shutting factories.
Cavallo pledged:
“With me … there will be no plant closures in this country.”
Key events
Thames Water’s Abingdon reservoir and Teddington recycling project signed off
The government has agreed to Thames Water’s plans for a new reservoir in Oxfordshire and a project to replace water from the Thames with treated sewage, the water company has announced.
Thames says that the Secretary of State for Environment, Food and Rural Affairs, Steve Reed MP, has approved Thames Water’s Water Resource Management Plan.
The plan includes two major infrastructure projects:
Thames says both projects will play “a crucial role in securing drinking water supplies for millions of households and businesses across the region”.
But plans for the new 150bn-litre reservoir to the south-west of Abingdon are unpopular with local residents and campaigners.
As my colleague Phillip Inman reported last year:
The Abingdon reservoir is the cornerstone of plans to build a resilient network of water sources – ones that can be easily deployed when shortages hit. Yet local residents and politicians say they remain confused by it.
What was going to provide Oxfordshire with a degree of drought resistance when it was put forward in 2010 became a solution for London in 2019. Then Thames, Affinity and Southern, the three water companies that plan to build the reservoir, said its water would be piped south to Portsmouth.
The Teddington plan is also controversial. It involves drawing off tens of millions of litres of water a day from the Thames, to refil reservoirs in east London, and replace it with treated effluent from the Mogden sewage works.
The idea has been rejected once by the Environment Agency, because of the anticipated unacceptable impact – it could increase water temperatures and change the salinity of the river.
In the technology sector, Ireland’s data regulator on Wednesday said it had ended proceedings against social media platform X in the Irish high court.
Ireland’s Data Protection Commission took the move after X (ie Twitter) agreed to limit its use of personal data collected from European Union users to train its AI, called ‘Grok’, on a permanent basis.
The DPC said in a statement.
“The proceedings have been struck-out on the basis of X’s agreement to continue to adhere to the terms of the undertaking on a permanent basis,”
The DPC is the lead EU regulator for most of the top U.S. internet firms, because many base their EU operations in Ireland. In August it sought an order to suspend or restrict X from processing the data of users for the purposes of developing, training or refining its AI systems.
Des Hogan, chair of the DPC, says today:
“The DPC welcomes today’s outcome which protects the rights of EU/EEA citizens.
This action further demonstrates the DPC’s commitment to taking appropriate action where necessary, in conjunction with its European peer regulators. We are grateful for the Court’s consideration of the matter”.
Jamie Dimon to meet Rachel Reeves today
Kalyeena Makortoff
The Chancellor Rachel Reeves’ is gearing up for a meeting with the CEO of Wall Street banking giant JP Morgan this afternoon.
It’s the government’s first meeting with Jamie Dimon since Labour took office, and will continue the party’s charm offensive on the City that began in the run up to July’s general election. The meeting coincides with Dimon’s own business trip to London.
The Treasury was contacted for comment. JP Morgan declined to comment.
It comes as the Treasury faces scrutiny over whether it caved to pressure from banks and financial firms over payment regulations due to come into force in early October, which would have forced them to compensate fraud victims up to £415,000.
The Payment Systems Regulator announced on Wednesday that it was consulting on new threshold that would cap mandatory compensation at a much lower level of £85,000 (see earlier post for details).
Volvo scales back EV car target as demand wanes
Volkswagen isn’t the only car maker struggling with the transition to electric vehicles.
Volvo has just announced that it has abandoned its target to sell only electric cars by 2030.
The Swedish auto maker insists that full electrification remains a key pillar of its product strategy. But it has decided to “adjust its electrification ambitions”, a move blamed on “changing market conditions and customer demands.”
This means Volvo will only aim for between 90% and 100% of its global sales volume by 2030 to consist of electrified cars. That means either plug-in hybrid models – which have a fossil fuel engine as well as an electic motor – or fully electric ones.
The remaining 0-10% of sales would be filled by mild hybrid models – which uses a battery-powered electric motor to support a conventional petrol or diesel engine to improve efficiency and reduce emissions – if needed.
Volvo says that by 2025, it expects the percentage of electrified products to come in between 50 and 60 per cent, adding:
Well before the end of this decade Volvo Cars will have a complete line-up of fully electric cars available. That will allow Volvo Cars to make the move to full electrification as and when the market conditions are suitable.
Volvo’s moves follows signs that demand for electric cars has slowed. In July, sales of battery electric and plug-in cars fell by 10.8% and 14.1% respectively, while those of hybrid-electric cars jumped 25.7%, according to industry body ACEA.
US trade deficit swells
Just in: the US trade deficit jumped in July, new figures from the Bureau of Economic Analysis and the Census Bureau show.
The deficit increased to $78.8bn, from $73.0bn in June, as imports increased more than exports.
The US goods deficit increased $5.6bn in July to $103.1bn, while America’s surplus in services decreased $0.2bn to $24.3bn.
The US goods and services trade deficit was $78.8 billion in July 2024, an increase of $5.8 billion from June 2024’s revised deficit of $73.0 billion. pic.twitter.com/fdWfe5Xpt7
— Econoday, Inc. (@Econoday) September 4, 2024
The US ran its largest deficit with China, and followed by the EU and Mexico.
Here’s more details:
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The deficit with China increased $4.9 billion to $27.2 billion in July. Exports decreased $1.0 billion to $11.5 billion and imports increased $3.9 billion to $38.7 billion.
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The deficit with Canada increased $3.0 billion to $7.6 billion in July. Exports decreased $1.4 billion to $27.3 billion and imports increased $1.7 billion to $35.0 billion.
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The deficit with Vietnam decreased $1.4 billion to $9.5 billion in July. Exports increased $1.0 billion to $2.1 billion and imports decreased $0.3 billion to $11.6 billion.
Heather Stewart
Amazon has announced a pay rise worth nearly 10% for tens of thousands of UK employees, after defeating an attempt by the GMB trade union for bargaining rights over pay and conditions.
The online retailer said the increase would lift minimum pay rates by 9.8% to between £13.50 and £14.50 an hour, depending on location. Staff with at least three years’ service will receive a minimum of between £13.75 and £14.75 an hour.
The pay rise will apply to thousands of Amazon staff from 29 September, including delivery drivers and those employed in the retailer’s UK fulfilment centres.
The 9.5% plunge in Nvidia’s share price yesterday was painful for CEO Jensen Huang.
Bloomberg has calculated that Huang’s net worth fell by about $10bn to $94.9bn.
Anticipated cuts to US interest rates are driving demand to mortgages.
New data shows that applications for a mortgage to purchase a home rose 3% last week, but were still 4% lower than the same week a year ago
Applications to refinance a home loan fell 0.3% for the week but were 94% higher than in 2023, the Mortgage Bankers Association reports.
Joel Kan, an MBA economist, says:
“Refinance applications were slightly down but continued to show strong annual gains as borrowers with higher rates have been refinancing to lower their monthly payments.
The refinance share of applications averaged almost 46 percent in August, the highest monthly average since March 2022.”
The rates on US mortgages have dropped in recent weeks, as the markets have anticipated cuts from the Federal Reserve soon.
There’s currently a 60% chance of a quarter-point cut to US interest rates later this month, and a 40% possibility of a larger, half-point reduction, according to CME’s Fedwatch tool.
UK payments regulator proposes slashing amount banks must refund to fraud victims
The UK payments regulator has confirmed it is planning to slash the amount that banks will have to refund to fraud victims – from £415,000 to about £85,000.
The Payment Systems Regulator (PSR) is proposing that the maximum refund for victims of authorised push payment (APP) scams should be capped at £85,000, as was reported last night.
That would bring it into line with the protection available for bank savings. But it’s a dramatic cut on the PSR’s previous proposal, that refunds would be capped at £415,000.
Lenders, fintechs and some politicians had protested that a cap of £415k was simply too high.
According to the PSR, the proposed lower cap will still see over 99% of claims (by volume) covered.
It says that in 2023 there were 18 instances of people being scammed for more than £415,000, and 411 instances of more than £85,000, out of over 250,000 cases.
David Geale, the PSR’s managing director, says:
“We listened to concerns about the reimbursement limit and committed to collecting more evidence to inform our approach. As a result, we are now consulting on a limit that still covers the vast majority of authorised push payment scams and strikes the right balance.
Under our proposals, consumers in the UK will still receive world-leading protection, payment providers will still be heavily incentivised to improve anti-fraud protections and we maintain effective market competition and innovation.”
The PSR has launched a consultation on its proposal, which closes in just two weeks on on 18 September. You can take part here.
UK watchdog clears Microsoft’s partnership with Inflection AI
Back in the UK, the competition authorities have cleared Microsoft over its hiring of former employees from artificial intelligence startup Inflection.
The Competition and Markets Authority has decided not to refer the situation to an in-depth probe, having examined it.
The hiring was controversial, as MS hired Mustafa Suleyman, Inflection’s co-founder, along with most of the startup’s staff. In response, the CMA eamined whether the deal actually constitutes a merger under UK rules.
It has now concluded that the deal is unlikely to lead to a significant loss of competition.
Daniela Cavallo, VW’s top employee representative and a member of the supervisory board, made it clear today that Volkswagen’s management were failing:
⚠️ VOLKSWAGEN WORKS COUNCIL HEAD:
**PLANS TO CLOSE FACTORY SHOWS MANAGEMENT HAS FAILED
**THERE WON’T BE ANY PLANT CLOSURES UNDER MY WATCH
**VOLKSWAGEN’S PROBLEM IS THAT MANAGEMENT IS NOT DOING ITS JOB
**DEMAND FUTURE STRATEGY THROUGH 2035
**CONFIDENCE IN MANAGEMENT BOARD…
— PiQ (@PiQSuite) September 4, 2024
Volkswagen’s shares have dipped by around 1% this morning.
So far this year, they’ve lost almost 15%.
German economy set to shrink again this year
Volkswagen’s problems come amid a wider crisis in the German economy.
The Kiel Institute for the World Economy has predicted that Germany’s GDP will shrink this year, as the gloom in Europe’s largest economy refuses to shift.
Kiel predicts Germany will shrink by 0.1% over the course of 2024, having slipped 0.3% last year. It had previously expected growth of 0.2% in gross domestic product over the year.
For 2025, growth expectations have been more than halved; down from 1.1% to 0.5%.
In its sutumn forecast, Kiel says:
Positive signals in the middle of the year have not been confirmed, which is why the Kiel Institute is revising its expectations for this year and the coming year significantly downwards.
Recent economic data has confirmed that German GDP fell by 0.1% in the second quarter of this year, putting it on the brink of recession.
At least 16,000 workers joined Wednesday’s meeting in and around the cavernous halls of Volkswagen’s main factory in Wolfsburg, a spokesperson for the company’s works council told Bloomberg.
Many held up signs or chanted “we are Volkswagen — you are not.”
Photos: VW workers protest about factory closure plans
Volkwagen staff held a protest before the start of today’s works meeting, where they were warned that time is running out to turn its fortunes around.
Around 16,000 workers squeezed into the packed hall, Reuters reports, with another 5,000 outside watching on a screen,
