By on March 23, 2020

Herbert Diess Jetta 2017

Volkswagen CEO Herbert Diess knows the viral headwinds facing his company won’t ease in a few weeks, nor will the need to curtail production in the face of rampant coronavirus infections.

Following a week that saw the auto giant idle production in Europe and the United States, Diess said the temporary plant shutdowns are just the beginning. His words no doubt echo the thoughts of most, if not all, Western auto execs.

In a LinkedIn post noticed by Reuters, Diess said, “Most of our factories are closing for two weeks, in some regions for three. It is likely that these measures will last.”

While not in the same boat as hard-hit nations like Italy and Spain, Germany, likes its neighbor, France, face growing numbers of coronavirus infections. The country’s case load is expected to top 20,000 on Monday as new measures aimed at flattening the rise in infections go into effect. German Chancellor Angela Merkel recently banned public gatherings of more than two people. Businesses of almost all types are shuttered.

“Volkswagen will support these measures as much as possible in order to save as many people as possible,” Diess wrote. “That is our first priority.”

In the U.S., Chattanooga Assembly went dark on Saturday for a period of one week; following a deep-cleaning, plant execs will make a judgement call. It’s not expected that the viral environment in the U.S. will get any better for a number of weeks, and the same goes for Europe.

The spread of the virus is unlikely to have stopped in several weeks,” Diess wrote, stating the obvious. “So we have to be prepared to live with the threat for a long time — until effective medication or vaccination becomes available. Until then. preventing the transmission and slowing down the spread are the main measures.”

True everywhere, but where does that leave VW and its rivals? Well, for starters, VW is leveraging its manufacturing capacity and supply chain to provide Germany with respiratory masks and other essential health items; we’ve seen General Motors and Fiat Chrysler make moves towards this on the other side of the Atlantic. At the same time, however, the business of building cars continues in whatever form the current situation will allow.

Like Ford, the German giant aims to firm up its financial footing, but there’s still many other areas in which to act, Diess said.

“Cutting edge measures to secure liquidity, but also the ability to deliver, for spare parts or the continuation of critical vehicle projects, such as the ID.3 startup, the supply of battery cells, or the work of our crisis teams, and much more — are extremely important to deal with the Crisis,” Diess said.

That capital “c” is no typo.

[Image: Volkswagen]

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27 Comments on “Long, Rocky Road Ahead for Automakers: Diess...”


  • avatar
    SCE to AUX

    I’m amending my predicted drop of 20-40% to 40%.

    https://www.thetruthaboutcars.com/2020/03/u-s-auto-dealerships-ask-trump-if-they-can-stay-open-amid-outbreak/#comment-9887388

    Even with just an 8-week shutdown, it’s not like mfrs will ramp up instantly, and buyer won’t run into dealerships. CV flareups will happen, and social mistrust will keep workers and buyers away for a long time. Besides, widespread unemployment will curtail sales.

    • 0 avatar
      Lorenzo

      I doubt there will be an eight week shutdown everywhere, just in the hardest-hit places. Trump has already signaled that a 15 day shutdown would be enough, though hard-hit locations like the NY-NJ-Long Island area would have to remain in lockdown longer.

      That sounds like a possible mess, but that’s what Washington, DC is known for. The devil is in the details, but we have lots of Representative Devils and Senator Devils who are up to the challenge of mucking up.

      Our national pattern is to deploy cherished delusions that fail spectacularly, then there’s a muddle-through period of disillusionment and despair, until a jury-rigged, ad-hoc system comes together that roughly achieves much reduced but realistic goals.

      It’s the American Way in all crises.

  • avatar
    Lokki

    There’s a typo in that headline:

    FIFY

    “Long Rocky Road Ahead For Automakers: Dies

  • avatar
    Matt51

    If any come to the US government for cash, make them go through bankruptcy and fire all the executives.

    • 0 avatar
      Art Vandelay

      Yes, and we will replace them with executives from where? If you want to attach some strings with respect to lessons learned from prior events such as this, fine but these companies don’t run themselves and firing every executive would be just stupid.

      Honestly, if I am running an automaker and the Government tells me I should shut it down, then upon going for some help you told me something like that I’d go back to my office and order all plants to reopen. Why would they simply sit and go bankrupt? It is a crisis and keeping key businesses running is a valid Government role here. Yes, rules on the money is a good idea, and requiring them to keep workers on payroll is fine. Them having jobs to come back to is also a good idea. Hate away, but both sides of the political aisle are going to have to suck it up on some of this.

      • 0 avatar
        ajla

        I think it is bizarre that people are still holding to anti-“bailout” principles during this. The government has *ordered* these companies to be completely shut down and told a vast portion of their customer base that they can no longer work as well. For perhaps months. I’m all for planning for “tough times”, but this goes far beyond that. The 2009 recession was like a pack of squirrels chewing on your house, this is like a grizzly bear crashing through your door.

        If Iran (or whoever) flew jets over and bombed these businesses to the ground would people still be so glib about companies needing assistance?

      • 0 avatar
        Matt51

        What happened to GM and Chrysler in 2008/2009? That economic downturn was not their fault either, but they were not prepared. GM, Ford, FCA should be prepared for downturns. Send Mary Barra to the economic gallows, she can play shuffleboard with Rick Wagoner. Do you really believe those people are not readily replaceable? Do you really believe any of them has a higher IQ than you? Every restaurant deserves a bailout more than the diminished three. Ford in particular was already in trouble. Chapter 11 does not mean liquidation, it allows companies to dump their debt and become economically viable. The idea is, don’t privatize profits but socialize losses. Don’t run to the government every time you get in trouble. I would agree, bailout every restaurant, hotel, bar and gym. Do not bailout Boeing. But we can see where this is headed. The only restriction coming for the big guys is they won’t be able to have stock buy-backs for two years. And the little guys will get peanuts, and their businesses will fail. Even though most Americans are employed in small business. They might get a $25,000 loan, if it ever passes, but that won’t be enough to save them.

        • 0 avatar
          DenverMike

          List the automakers that were “prepared” for this. And just how does a large, publicly-traded corp prepare? By the very nature of it, they have to live on the ragged edge.

        • 0 avatar
          Art Vandelay

          First off, you said fire all of the executives. There are waaay more executives than the ones with “Chief” in front ot their title.

          And yes, economic downturn is one thing, but having the Government tell you to shut it down or to start making ventilators is something else.

          And no, every local resturant doesnt deserve it more. Many of those are terrible and badly run too.

          I get it, big coorporations are bad because reasons. But talk all you want, none of these companies were near being insolvent before this and what of all of their employees? Where the hell do they go for work after all this?

          This is a crap deal, all day long, but what exactly is your plan should GM, Ford, Chrysler, Boeing, and a ton of other players of all sizes go belly up? We get it…you hate big companies because reasons, but you and your ilk have no plan or idea what to do if they all close.

          Again, the government tells you to shut down, they are on the hook to a degree. Don’t like it then let this thing run its course but you don’t get to scream “Muh Capitalism” with respect to them going bankrupt while telling them they can’t stay open.

          And now you want them to make ventilators? Sorry Uncle Sam, we can’t make payroll so maybe try China.

        • 0 avatar
          Art Vandelay

          And oh yeah @Matt, If you are going to go down that road with respect to businesses being prepared I would simply ask why me, someone who is in fact financially prepared for this to drag out for some time should give you a “bail out”? Why don’t you have some money put away for a rainy day? Shouldn’t you be held to the same standard as those big, evil companies since you are just so f^%king smart?

        • 0 avatar
          SirRaoulDuke

          Boeing is too important to national defense. The same argument could be made for the Big Three if we ever get in a shooting war with China or Russia.

    • 0 avatar
      MorrisGray

      Amen!

  • avatar
    Matt51

    The Big with lobbyists and their bribing power will get the money, the Small no one in government cares about. Where are your tears for small businesses that have been 100% closed? If big business needs Federal dollars, make them pay a price, can the management as a minimum. Send a message, do not ask for a handout lightly, do all that is within your power first. Boeing wanted $60 billion in loans, and they had not even cancelled their bonuses. Nikki Haley was so embarrassed and disgusted she resigned from Boeing’s board of directors. Yes if this goes on much longer, the cure will be worse than the disease, and we will have a great depression.

    • 0 avatar
      Art Vandelay

      Why haven’t you followed every financial advisor known to man’s advice and saved some cash for a rainy day? What makes you as an individual so deserving of a chunk of the fruits of my labor? At least Boeing, Ford, Gm, et al employ a ton of people with pretty well paying jobs by in large. So yeah, I can see a little of my tax dollars going their way to keep the wheels on. Do you have 6 months of living expenses in the bank? If not maybe we should let someone else run your finances before you get a penny of tax money “bailout”.

      • 0 avatar
        FreedMike

        You have a point, but one could surely make the same point about a multi-billion-dollar corporation, you know?

        • 0 avatar
          Art Vandelay

          Well that is kind of my point. He was opposing giving money to the big companies because of bonus and all of the stuff that people routinely use to frame big companies as evil. It is a fair point and I am fine with strings on it.

          But to then assume Mom and Pop businesses are all these well run, well oiled companies is equally idiotic. Them being local is great, but many are badly run and inefficient.

          And then we get to the individual. Frankly if we are going to scream about bonuses and all of that stuff and complain that CEO’s don’t really work and the companies dont deserve the bailout, fine, but nobody getting the money on an individual level had better have a bigger TV, nicer phone, or nicer car than the people funding it.

          Now I don’t honestly feel that way. People have different situations as do companies. I’m simply pointing out that most of the people screaming the loudest about evil corporations haven’t followed individual “best practices” and have probably made some choices that could have them in a better spot for this but bring that up and you are poor shaming or something.

          I’m simply saying accountability for all here. Some businesses are going to fail, some people will die. It is now on the morons in Congress to minimize it. I am not optimistic, hence I have a good bit socked away and have made some choices to get through.

  • avatar
    Matt51

    Art – I am retired. I do not need nor ask for any money for myself. Don’t make stupid condescending assumptions. Massive Destruction of Capital is occurring as small business fails. People spend a lifetime, sometimes over multiple generations, to accumulate the capital to fund their small business. When they fail, there will be no jobs for these people to go back to.

    I always worked for big business, including GM at one point.

    • 0 avatar
      Art Vandelay

      The same goes for large businesses, and individuals. When you tell a person or business that they can no longer do what it is they do to make money, you cannot play the “capitalism dictates” card. Capitalism dictates after all that the only obligation any business has is to their customers and shareholders…not to your old and frail mother or grandmother.

      Again, I am fine with money to individuals and businesses of all sizes with strings attached at every level. You are correct, when small businesses fail there will be no jobs for those employees. Same with big businesses. Lots of folks work their too. This sort of thing is going to have something in it for all of the idealogies to hold their nose at.

      But this whole “These big companies are greedy and should get nothing is stupid”. Of course they are going to get something, just put the right strings on it this time.

      Or let them go bankrupt but rest assured, if you want to do that to those large companies and make them “operate more efficiently” then keep in mind, it is likely vastly more efficient to put their factories in other countries.

      But again, if we are going to play the “pure capitalism” card and the fate of a company I am running is at stake and no help is forthcoming then I wouldn’t shut down anything and capitalism dictates that as demand rises and supply falls prices rise so remember that when you want those companies to retool for medical equipment…supply and demand and all. The free market will sort it out, but not in the next couple of weeks and a ton of people are going to be SOL on so many levels.

  • avatar
    Matt51

    Art – bankruptcy hurts the shareholders and bond holders, but it also allows companies to be debt free, and more viable in the future. Let them “go belly up” as you say. Boeing has massive debt, as they borrowed money to purchase their own stock. Boeing can also sell off profitable parts of their business such as helicopters and missiles to fund commercial airliners. Boeing has far more choices available than your local restaurant. Part of capitalism means companies keep reserves for recessions and downturns, not borrowing money to fuel executive bonuses. I do not hate big business. Just don’t give them a free ride, unless you do the same for all businesses. Boeing needs to clean house, or as one engineer’s email stated, the 737 max was designed by clowns and supervised by monkeys.

    • 0 avatar
      Art Vandelay

      Yes, all businesses should have equal access here. And Boeing would hardly be my poster child here. But there are small businesses run equally idiotically that were close to failure before all this and should face the same scrutiny.

  • avatar
    Matt51

    GM has been big on stock buybacks, so let them eat cake.

    • 0 avatar
      Art Vandelay

      Fine. I know a lot of people that have been big on buying the latest iPhone, new cars, and generally living as if nothing bad was ever going to happen. Let them eat their cake as well then. There, no bailout for anyone, just saved 2.5 trillion bucks and hey, I got mine so to heck with everyone else.

      Of course this is not the answer, but again, if we are going to point out these CEOs and dumb corporate decisions I see no reason to subsidize similar stupidity on the individual level either.

    • 0 avatar
      DenverMike

      We’re not a society built on hoarding stockpiles of cash (or toilet paper). Congratulations if you do.

      It goes for individuals, small business to large corps. The rats (of all sorts) will eat into it, as well as normal inflation.

      • 0 avatar
        Matt51

        DenverMike,
        This is a major issue right now being discussed in Congress. Many large corporations borrowed large sums of money to buy their own stock. GM did, Ford did not. This used to be illegal. Financially, overall GM is still in better shape than Ford though, but Ford has been better behaved. CEOs wanted to boost the value of their stock options with these purchases. When the share price drops, companies such as GE and Boeing are still saddled with the massive debt that resulted from this borrowing. There is strong political opposition to providing financial aid to companies which pursued this strategy. Historically, in previous recessions, companies had to fend for themselves. The weak died, the strong survived, fairness was not an issue. There was a strong incentive for companies to have financial reserves. GM, Ford and Chrysler survived the Great Depression, while arguably companies with better cars failed. The financially better managed companies survived.

        • 0 avatar
          DenverMike

          For the normal economic recession, of course. If GM disappeared, Ford and FCA would’ve came out of it much stronger, soaking up most workers and suppliers. That sort of thing happens everyday in small business.

          This isn’t anything like that.

  • avatar

    So conclusion is VW Dies? I mean Diess. How about others?

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