Volkswagen Stares Into The Financial Abyss

Estimated read time 4 min read

With other automakers heading in the same direction, we could be giving them a government bailout soon enough.

A new WardsAuto report is sending shockwaves through the auto industry as it’s revealed Volkswagen’s CEO Thomas Schaefer is warning managers “the roof is on fire.” After investing heavily in developing EVs and getting all cozy with China, those two strategies are blowing up in the automaker’s face in a way everyone should’ve seen. We have to wonder just how bad will things get and how many other automakers will be looking at financial doom while asking everyone to finance their government bailout.

Automakers are building electric cars but consumers aren’t buying them.

Schaefer tried stirring his managers during a recent internal meeting, says WardsAuto, telling them “all is at stake” as he portrayed just how bad the impending financial catastrophe for the company might be. To weather the storm, the CEO is calling for “small wins” and streamlining operations while instituting “performance programs.” He hopes to shed $11.2 billion in spending over the next three years just to keep the company going.

We can’t stress enough how bad this is. While we have no doubt the German government would bail out Volkswagen if things get too bad, that’s going to put quite the strain on the country and its economy. Plus, we would be shocked if this doesn’t spell some big layoffs in the near future along with other painful cuts.

Other automakers which have been going all-in on EVs have been feeling the pinch. And with demand for electric cars softening, the worst is yet to come. For example, Ford disclosed it lost a whopping $2.1 billion on its EV division during 2022. While the automaker tried to spin that loss as not a big deal, both it and GM have already been doing layoffs and battening down the hatches for a coming economic storm. On top of that, Ford CEO Jim Farley has almost casually admitted the automaker’s strategy of leaning into EV will cost many people their jobs.

Automakers which have also bet the farm on future growth in China are starting to get burned. Intensifying nationalism and a pushback against foreign automakers has lead to a surge in domestic brand Chinese sales, with VW having the biggest exposure risk in the Middle Kingdom. But other automakers like GM which have capitulated to the Chinese Communist Party with the promise of access to over a billion consumers are increasingly getting shut out in the cold. This was foreseeable and avoidable, but the allure of wealth blinds many.

Sheer panic is starting to ripple through the auto industry after automakers and dealers went ham during the pandemic, doing all they could to soak up all that free government money, only for the floor to fall out afterward. As we’ve covered before, new car sales aren’t doing great as prices stay obnoxiously high, interest rates climb, and consumers deal with inflation for everyday necessities. A market correction has to come and since many don’t want to make it themselves, the only other way is going to be through plenty of involuntary pain.

Sadly, the result could be automakers coming to Congress with their hat in their hand, asking for a bailout. It seems sadly likely both Ford and GM will find themselves in that position thanks to their risky decisions made while ignoring the core domestic market. It’s hard to feel sorry for them if this eventuality comes true because they did this to themselves while coordinating with the EPA to force us all to buy EVs.

Maybe the auto industry will by and large avoid faceplanting painfully, although that will be a miracle that will require some big changes. Most likely at least a few storied brands might not be around in the next few years. This could be a truly wild ride.

Images via GM, Volkswagen, Ford

Steven Symes

Steven Symes is an accomplished automotive journalist with a passion for all things related to cars. His extensive knowledge and love for the automotive world shine through in his writing, which covers a diverse range of topics.

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