In Mexico we have our own waves. Yesterday the Supreme Court announced that it will join the national strike of the Judiciary to try to stop changes to the Constitution.
These local dilemmas distract from what is happening in the global context on issues that would otherwise provoke many raised eyebrows and possibly rebound impacts in, say, the state of Puebla.
Volkswagen AG, the main investor in that Mexican entity, is considering closing factories in Germany for the first time in its 87-year history, according to information revealed yesterday by Bloomberg.
The reason? Competition from China and the United States from brands such as Chery (Chirey) and Tesla. What consumers may be grateful for is also derailing the operation of major European car suppliers, even in the country of historic origin of automobiles.
“VW is recognizing how serious the situation is,” said Harald Hendrikse, an auto analyst at Citigroup.
In Mexico, Volkswagen has a nine percent market share, slightly higher than last year, and is the third largest car seller, behind Nissan and General Motors, in that order.
But its global vehicle sales fell two percent to 4.3 million units in the first half of the year.
The company’s headline figures for shareholders looked better than that, thanks to a two percent rise in revenue at its financial services division, but its operating margin is still 6.3 percentage points below the same period a year earlier.
Its shares? They are already at 95 euros each, a price 60 percent below the level of three years ago.
That’s why the company is trying to cut costs, which led it to last-minute negotiations with its Mexican union less than a month ago, who agreed to call off a strike in exchange for a 10.6 percent pay raise.
But in Europe the scenario is different, with employees earning higher incomes and the market facing strong competition from China and the United States, via Tesla.
Bloomberg reported that car sales on the continent are still nearly a fifth lower than pre-pandemic levels. Carmakers including Volkswagen, Stellantis and Renault were operating more than 30 factories at levels that analysts consider unprofitable, according to data from Just Auto. That includes Volkswagen’s sprawling local factory in Wolfsburg, the largest in Europe.
The continent is uniquely exposed to the twilight of the combustion age.
The market is demanding electric cars, and Chinese manufacturers are offering them at exceptionally low prices.
This situation is forcing the influential Volkswagen to consider selective plant closures in the days when Germany is facing political elections. This month, its citizens elect new state authorities in the states of Saxony, Thuringia and Brandenburg.
In first place in the polls is the far-right party that has been working for some years on the hidden vindication of Nazism, wrote Pablo Hiriart in a column published on Friday in The Financier“This is the German Alternative (AfD), whose positions are so extreme that in the European Parliament, Marine Le Pen’s (French) party and Viktor Orbán’s (Hungarian) party have refused to form alliances with it.”
In this scenario, Volkswagen executives grapple with finance and politics.
“What is ultimately at stake is the future viability of the industry in this country and a corresponding domino effect,” said Daniela Cavallo, Volkswagen’s chief employee representative, in a works council newsletter.
This, in the same year in which the company announced that it will invest 942 million dollars in its Puebla plant to create a strategic center for electromobility. Pay attention.
