Volkswagen is facing tough competition in Europe, where government-mandated emissions targets are forcing manufacturers to discount heavily and sell less-profitable electric vehicles (EVs) even as demand for the cars is slowing.
For VW, problems in both these markets could soon be compounded by European Union tariffs on imported Chinese EVs. There are fears that Beijing is poised to retaliate with taxes on cars that are exported from the Continent. Roughly one third of VW’s sales are generated in China.
Tariffs came into force on Wednesday, prompting the commerce ministry in Beijing to declare in a statement: “China will continue to take all necessary measures to resolutely safeguard the legitimate rights and interests of Chinese companies.”
Volkswagen’s problems will bolster the case being made by managers that painful cuts are necessary to keep VW competitive and safeguard its future. Oliver Blume, VW’s chief executive, has argued that the company “is at a decisive point in its corporate history”.
The business is seen as being behind its Chinese rivals on development of EVs in particular. As a result, bosses are seeking to ramp up investment in new facilities such as battery factories while trimming costs elsewhere.
Earlier this week, it was claimed that VW was preparing to shut three German factories, sack tens of thousands of workers and reduce pay permanently by 10pc.
The proposals face strong opposition from the company’s powerful works council, which holds half of the seats on its governing body.
Daniela Cavallo, head of the works council, was due to begin a fresh round of talks with VW managers on Wednesday.
She has suggested Mr Blume must back away from the proposals or reckon with employees who will “do what a workforce has to do when it fears for its existence” – a thinly veiled reference to potential strikes.