Volkswagen AG (VLKAY) sales fell for a second straight month in November in its key home market of Germany, adding to the gloom over Europe’s largest automaker as it prepares to make its first lay-offs in the wake of the diesel emissions scandal.
According to figures released by the national regulator KBA, VW brand sales in Germany, the company’s home market, fell 2% in November from a year earlier, badly lagging overall market growth of 8.9%. Until September, when the emissions scandal broke, it had been beating the overall market. The group’s luxury Porsche and Audi brands, which have also been caught up in the scandal, also lagged the market, posting growth of only 0.7% and 3.0%, respectively.
Audi’s market share in Europe’s largest car market fell to 8.0% in November. Before the scandal broke, it had averaged 8.6% in 2015. But the VW brand’s share, by contrast, has barely dipped at all, at 21.3%.
The figures come a day after VW’s U.S. unit said sales had fallen 25% on the year in November after it withdrew a number of the models affected by the scandal from the market. It hasn’t done that yet in European markets, and is counting on a more friendly regulatory environment to get by with relatively cheap and simple fixes to most of some 8 million cars in Europe that are affected. Earlier this week, it started a recall of 2.46 million cars in Germany, and today it said it plans to recall 324,000 vehicles in India.
VW has already said it will cut its investment budget to conserve cash, but signs are starting to show that it is planning bigger cuts, including lay-offs. Earlier this week, it imposed an extended, four-week holiday over Christmas and New Year for most of its plants in Germany, including its HQ at Wolfsburg. VW will also cut this year’s bonuses for around 120,000 staff by around 75% (CEO Matthias Müller told the magazine Stern Wednesday he intends to cut management bonuses too).
According to local media reports, the company is now planning to lay off 300 temporary workers at its truck plant in Hanover at the end of January. Another 500 will have their contracts extended by a mere three months. Although the truck branch hasn’t been directly affected by the scandal, Müller has said that every bit of non-essential spending will be cut as it hoards cash to pay for an expected barrage of legal settlements.
VW, like the rest of the German car industry, makes liberal use of relatively recent German labor laws that allow it to ringfence new and temporary workers from its permanent, full-time staff. The distinction allows companies to adjust staffing levels to fluctuations in demand without getting tangled up in complex and expensive disputes with their powerful labor unions. Around 6% of VW’s staff in Germany are employed on such temporary contracts (many of them get a permanent contract after three years).
Chief executive Matthias Müller has said he thinks VW can avoid cutting the Stammbelegschaft, the much larger army of permanent workers, a message that core shareholder Wolfgang Porsche repeated in an op-ed in the Wolfsburg local paper yesterday.