VW CEO Says Factory Closures in Europe Could Continue for Weeks

VW Group plants were among the first to suspend vehicle production in the month of March, with the SEAT plant near Barcelona being the first as Spain was hit hard and early with COVID-19 cases. At the conclusion of the third week of March, all Volkswagen Group brands including Audi, Skoda, Bentley, SEAT, VW, Bugatti and its Scania truck unit have halted production for at least two weeks, including Volkswagen’s plant in Tennessee, aiming for an early April restart as EU countries imposed a range of quarantine measures.

Volkswagen Group CEO Herbert Diess warned in a post on LinkedIn on Saturday, March 21, that the factory closures are likely to last well beyond the initially projected periods of downtime.

“Most of our factories close for two weeks, in some regions for three,” Diess wrote. “It is likely that the measures will take longer. The spread of the virus is unlikely to have stopped in several weeks. So we have to be prepared to live with the threat for a long time—until effective medication or vaccination becomes available.”

Diess did not offer a more detailed timeframe for the restart of production, to the extent that such predictions could be made in an environment that changes by the hour if not by the day. His comments suggest factory downtimes numbering weeks or months, indicating it’s unlikely that automakers based in the EU could restart production in mid-April or even sometime in May at the current rate of infection and industry disruption.

While many automakers have signaled that initial production shutdowns will last two to three weeks, as Diess noted, the reality is that without auto sales continuing on some level it doesn’t make much sense to send workers back to the plants to produce vehicle inventory that will just pile up in parking lots around the factory. Dealerships in many EU countries are either closed or are operating on greatly reduced hours, only keeping service departments working, and are expected to cut back on hours even further as more stringent quarantine measures are implemented by EU countries and outside of Europe. Without open dealerships (or online vehicle sales) and at least a trickle of demand, restarting car plants at varying levels of capacity may not prove fruitful for automakers.

However, Diess noted that VW factories in China are starting to come back online after weeks of closures.

“Over 100,000 of our Volkswagen employees in China are starting up their business activities again after overcoming the acute crisis,” Diess wrote. “The sanitary and organizational measures are being continued there with great discipline—in my view exemplary—to keep the spread of the virus under control even after acute containment.”

Just like other European automakers, VW has also been working with the government of Germany to explore options for the production of medical equipment.

“Today we are building up production capacity for protective masks in China and are helping to support the German health care system with temperature measuring devices, respiratory masks, disinfectants and diagnostic devices,” Diess added. “We are trying to bring in our global presence, logistics chains and resources to deal with this global crisis.”

Source: Read Full Article