00:00These are my parents on their wedding day in a Volkswagen Golf.
00:06And Arthur, my childhood dog, riding his Volkswagen Beetle.
00:10And this is me in my first car, also a Beetle.
00:14Here in Germany, Volkswagen has been a part of everyday life for families like mine.
00:19And a pillar for the economy.
00:22It's been the dominant car brand for decades.
00:27But now it's desperate.
00:30Its market value has plummeted to lows last seen after the 2008 financial crisis and the
00:36dieselgate scandal.
00:40Volkswagen needs to cut costs.
00:42And its management has been pushing for plant closures in its German heartland.
00:47But VW functions differently from any other car company in the world.
00:51It's also workers who call the shots.
01:07Until now, VW had been locked in a stalemate.
01:11They have tried over years to become leaner and more efficient, but the unions have stepped
01:18in and prevented those job cuts.
01:21After the longest collective bargaining in VW's history, unions and management came
01:26to an agreement.
01:28Volkswagen is cutting jobs, but leaving its plants in Germany open.
01:32But the question that remains, is this a sustainable path for the future?
01:38Experts are sceptical.
01:39This is maybe the final attempt to revive the old model without really going where it's
01:50very painful, without really thinking about, are our models still correct?
01:54Is our production still correct?
01:56Or should we rather go for abrupt but more painful change?
02:02VW's fate could seal Germany's future as a car nation.
02:06Coming up on this episode of Business Beyond.
02:11Before we keep going, let's get something confusing out of the way first.
02:15There are two types of Volkswagen.
02:18There's the Volkswagen Group, which is a conglomerate that owns 10 different car and
02:22truck brands.
02:23But in this explainer, we will be mainly focusing on the Volkswagen brand.
02:29So the maker of these cars.
02:34Volkswagen is one of the forces that turned Germany into Europe's industrial heart.
02:39The carmaker has 10 factories across the country.
02:43Almost half of VW's global workforce is employed here.
02:49Volkswagen is a highly symbolic company for Germany.
02:53It represents the car industry.
02:55The car industry stands for 15% roughly of value added within the industrial sector,
03:01which is roughly 25% of German GDP.
03:05Right now, Volkswagen is facing a crisis on multiple fronts.
03:09The brand is struggling with profitability.
03:12It's lagging far behind its target.
03:16The European market is underperforming.
03:18China is shrinking for foreign brands.
03:22And the electric vehicle uptake is taking far longer than people expected.
03:26Most companies will say, OK, we need to cut plants.
03:28We've got far too many employees.
03:30We've got far too many production plants.
03:32People are sitting around on their hands not doing anything.
03:36And that's what VW management did.
03:38In September, it nixed a decades-old job guarantee for its German workers
03:42and for the first time in its 87-year history,
03:46planned on closing factories in Germany, according to the Works Council.
03:51The announcement prompted the biggest strikes in the carmaker's history.
03:55But at Volkswagen, it's not that simple.
03:58VW functions differently from all of its rivals.
04:01It's not just management that has the final say here.
04:05In accordance with a law written just for VW,
04:08regional government has voting powers in the company's decisions.
04:12Most of the time, they ally with workers' interests
04:16and at odds with investors.
04:18The state of Lower Saxony has two seats on VW's supervisory board.
04:22Those, along with the 10 seats given to the labor side,
04:25mean workers' interests have a majority.
04:29Today, VW workers have some of the strongest organized labor power in the world.
04:34Works Council leader Daniela Cavallo has been called
04:37the second most influential person in the company after the CEO.
04:41Now, she helped prevent the first-ever VW plant closures in Germany.
04:47So, how did we get here?
04:501930s Germany, the country was far from being the order nation it is today.
04:56Just half a million cars were driving on its roads.
04:59France had three times as many.
05:02When Adolf Hitler seized power, he set out to change that.
05:06He hired engineer Ferdinand Porsche to come up with a car affordable for most people.
05:16But Hitler's car plants needed a car plant.
05:19And money.
05:20To finance the construction of the first VW plant in Germany,
05:24he turned to workers' wallets.
05:27The Nazis had confiscated all workers' union offices,
05:31uniting them under the German Labor Front.
05:34The expropriated union funds collected by the German Labor Front
05:38were used as the starting capital for Volkswagen.
05:4150 million Reichsmark.
05:44But as the Second World War started,
05:46weapons, not cars, rolled off the VW factory floors.
05:51A look at Volkswagen's history reveals a company built on extorting its workers.
05:56From stolen union funds to forced labor.
05:59When the Second World War ground to a halt,
06:02British allies took control of the plant.
06:05Again, workers played a decisive role.
06:08They cleared the factories of rubble and recycled the waste.
06:12But the workers' union funds were not enough.
06:15Again, workers played a decisive role.
06:17They cleared the factories of rubble and restarted production.
06:23Quickly, the carmaker turned into the symbol of Germany's post-war economic miracle.
06:28The Volkswagen, literally translated to people's car,
06:32became known as affordable and reliable.
06:36By 1955, VW had produced its one millionth Beetle.
06:40The car was being exported to almost 100 countries around the world.
07:01Business was booming and VW was hiring.
07:04Perks were meant to lure in more workers.
07:08Like higher wages and sick pay.
07:10Not a given in Germany at the time.
07:12Volkswagen became synonymous with safety and prosperity.
07:20But one question remained.
07:22Who owned Volkswagen?
07:25Until now, the German government had acted as an interim trustee.
07:29But in 1961, VW went public, becoming Germany's biggest company.
07:34In the same year, the VW law was passed.
07:37It was meant to protect the carmaker against outside influence.
07:41Like this.
07:43And it did so by mandating that no shareholder can have more than 20% of voting rights,
07:48no matter how much of the company they own.
07:52Many VW workers bought shares at a discounted rate.
07:55And the German state of Lower Saxony became one of Volkswagen's biggest shareholders,
08:00giving it 20% of voting rights.
08:03So both the state and workers became ingrained in the new VW structure.
08:11This is Hans Wilhelmi, the Minister of Economy at the time.
08:23The founding families, the Porsche Piechs, eventually became the largest shareholder.
08:29So, based on its complicated history, Volkswagen created its very own brand of capitalism.
08:35A hybrid between state-run and family-owned, with special protection for its workers.
08:42Since the VW law was passed, the need for management-worker consensus has been a fixture.
08:48And so have above-average wages.
08:51At 15.4%, Volkswagen spends more on labour than all of its competitors.
08:59They're earning much more than all the other workers around in this country.
09:06Even they're earning more than someone working for Daimler, Mercedes or BMW.
09:14During good times, it's a deal that worked.
09:17In 2011, Volkswagen Group raked in record profits.
09:21And as the company did well, it's not just shareholders who benefited.
09:25Workers did, too. Wages rose.
09:30But now, Volkswagen is struggling on multiple fronts.
09:34And its unique form of capitalism has been put to the test.
09:37Take electric vehicles, for example.
09:42This is its plant in Zwickau, in the east of Germany.
09:46In 2019, the production of combustion engine cars here was turned on its head.
09:51Now, only electric vehicles roll off the assembly line.
09:55The workers at the plant were retained and retrained.
10:14To produce the software for its EVs,
10:17Volkswagen spent billions on an in-house software maker, Carriot, headquartered in Germany.
10:23But VW's plans haven't worked out.
10:26In Zwickau, there's too little work for the 10,000 employees.
10:30Instead of three shifts a day, workers here are currently only putting in two.
10:46But low demand isn't the only problem.
10:50VW's electric cars are pricey.
10:52The ID.3 is the cheapest model, but it still costs more than many of its European competitors.
10:58Just as cheap Chinese cars are rolling onto the European market.
11:20And sometimes it costs five or six times as much.
11:24On top of that, VW's electric cars have become infamous for software glitches.
11:30You get to the car, the keyless entry doesn't work, the car doesn't unlock.
11:34You have to use the key to unlock it, which still works.
11:38And the app doesn't work.
11:46Jens Dralle's job is testing cars.
11:49So if that is just black, then you can't control the major functions of the car.
11:55So this is the major issue.
11:57A look at VW's factory in Zwickau shows the car maker needs to reform.
12:02To turn its software struggles around, Volkswagen recently spent five billion dollars
12:07outsourcing its software production to Rivian, an American company.
12:13But when it comes to the money VW spends on its workers, drastic changes aren't in its DNA.
12:20After 70 hours of negotiations, Volkswagen management and workers found a way forward
12:26without shutting factories.
12:43Volkswagen is still cutting jobs, 35,000 in the next five years.
12:49But those cuts are meant to happen without terminations, through early retirements, for example.
12:55VW has also put its workers on leave,
12:58so that they don't have to work in the factories anymore.
13:01But that's not the end of the story.
13:03It's the beginning of a new era.
13:06Cuts are meant to happen without terminations, through early retirements, for example.
13:11VW has also put its job protection scheme back in place.
13:15This is a very mild outcome, at least in the shorter run,
13:20and clearly therefore positive for Volkswagen employees.
13:24Employees like Torsten Donnermeyer, who has worked at VW's factory in Kassel for 40 years.
13:31It's a bit like this. It's also our factory.
13:35You can tell by the history that it's also our factory.
13:39And we won't let it collapse.
13:45The new agreement includes other changes.
13:47For example, Volkswagen's EVs will no longer be produced in Zwickau.
13:51But experts are sceptical.
13:54When you look at the agreement, it indeed looks more like a short-term fix.
14:00And I think you can have a lot of question marks behind the question
14:04of whether this is sufficient to really bring Volkswagen back on track.
14:10What this agreement does is it will reduce the cost position for Volkswagen,
14:17but not with a sledgehammer, not appropriately, but more gradually.
14:22Volkswagen's deal to protect its workers stays true to its history.
14:27Some say it is not staying true to the economic future of the country.
14:31What we observe in the car industry is a process where increasingly car production,
14:36so the physical assembly of cars, takes place in other countries more than in Germany,
14:42whereas Germany focuses more on research and development
14:47and everything related to services within the industry.
14:50I think this trend will continue.
14:53And one of the implications is that Volkswagen will not be able to maintain
14:57all its production plants in Germany.
15:00While the standoff between management and workers is over for now,
15:04pressure for Volkswagen to reform will likely last.
15:22For more UN videos visit www.un.org
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