Volkswagen Might Try To Blow Itself Up To Save Itself

South Carolina Governor Strom Thurmond stayed in the Democratic Party during the Presidency of Franklin Roosevelt in spite of FDR’s stated support for civil rights. It wasn’t until President Truman pushed a plank of civil rights reforms that Thurmond and other southern Democrats left the party. When a reporter pointed out to Thurmond that Truman was basically just saying what FDR had said, the Governor responded “Yes – but Truman really means it.”

I bring this up in today’s The Morning Dump, not because I want to talk about the impending election, but because I heard a similar refrain from the head of Volkswagen’s Works Council. Companies always feign massive cutbacks in order to fare better in negotiations, but now labor in Germany is saying that this time VW actually means it.

The company is in bad shape for so many reasons, but a big one is that VW skipped over hybrids post-Dieselgate and has a bunch of electric cars that are only moderately performing. They’re not alone. The average EV has a lot of money on the hood.

Even Teslas are being discounted, but Tesla is so good at making electric cars that it’s not yet to the point that it’s crashing profits. Also, Tesla isn’t currently unionized and a new ruling might embolden Musk to tweet even more about it.

And, finally, chips are back in the car conversation again. Hit it Ponch!

VW Might Close Three Plants In Massive Cost-Cutting Move

I’ve already gone into great detail about the many mistakes Volkswagen has made, from jumping straight to electric cars to making cars that are uncompetitive. It doesn’t help that, in addition to the United States in China, Volkswagen still needs to sell cars in its troubled home market. [Ed Note: And that’s not even mentioning the big 2015 mistake. -DT]. 

Where’s this going? Nowhere good. Most of Volkswagen’s German plants are in Lower Saxony and, for various historic reasons going back to British oversight after WWII, the State of Lower Saxony essentially has a veto on any VW moves.

The local Works Council–basically a union–also has some small say in what happens and the head of the council, Daniela Cavallo, told her members that Volkswagen is planning deep cuts and legitimately means it this time.

Germany’s Manager Magazine filed this report from the Works Council meeting that has the whole automotive world buzzing this morning:

None of us can feel safe here anymore,” warned works council chairwoman Daniela Cavallo (49). “The board is against us.”

According to the works councils , the cuts that the board of directors, headed by CEO Oliver Blume (56) and VW brand boss Thomas Schäfer (54), are planning at the Wolfsburg-based carmaker could be even more serious than previously announced.

What does bad look like?

Cavallo and the works council now said that VW management wanted to close “at least three VW plants” in Germany . At the beginning of September, Group CFO Arno Antlitz (54) had stressed that VW was missing around 500,000 cars sold in Europe and thus “the sales for around two plants”.

When asked about the specific allegations, Volkswagen said: “We are not participating in speculation about the confidential talks with IG Metall and the works council at the collective bargaining and company level.” Human Resources Director Gunnar Kilian (49) stressed that the company is sticking to the agreed principle of “conducting these discussions internally with our negotiating partners.”

That’s not a “no,” and everyone seems to be taking this seriously.

Who is to blame for Volkswagen getting into this situation? That’s an entire essay for another time, but it’s probably not the workers. The government has some culpability. For years, the so-called Stoplight Coalition in Germany has tried to keep employment up in more conservative parts of the former East Germany and leaned on VW to build plants there. The country, as part of the EU, has pushed for electrification and then suddenly removed tax credits for buying EVs.

The biggest issue, though, has been leadership. Going back to Dieselgate, there’s been what some see as a pervasive aura of hubris at Volkswagen that might prove to be fatal over the long run. I think the new CEO, Blume, is from a separate generation and has a better view of things, but there’s only so much one CEO can do at this point.

What’s the plan? The plan sounds like blowing up Volkswagen from the inside and replacing it with a bunch of connected, smaller companies without all the legacy costs/issues. That explains the Rivian-VW deal, the no-dealer Scout model, and even the news that Cupra might come to the United States.

Volkswagen as a larger company has a lot of constituent parts that sort of work, but the actual Volkswagen brand itself isn’t one that makes a lot of sense at the moment, being split between non-hybrid gas-powered crossovers, cheap sedans, and overpriced electric cars.

That Band-Aid rip might be necessary, but I don’t see the German government and the Works Council just rolling over. At the same time, dealers in the United States say they’re going to fight Scout at every courthouse and statehouse in America if they have to.

It’s getting wild out there, folks.

EVs Need 12% Discounts To Move

The average ICE+ car (gas-powered and hybrid) needs an average of 7% of incentives to sell these days. That’s a high number, but not an unprecedented one. An EV? It needs about 12% in discounts on average to sell, according to Cox Automotive.

It does seem to working a bit:

The electric vehicle (EV) market continues to expand in the U.S., as recent Cox Automotive data reveal a year-over-year rise in sales for both new and used EVs. September marked the sixth consecutive month in which new EV sales surpassed 100,000 units. EV share of new vehicle sales achieved a notable 9% last month, the highest level to date. The price difference between electric and traditional vehicles narrowed in September, indicating greater accessibility. In the new-vehicle market, EV incentives remain elevated.

So more EVs are being sold, but discounts are high.

Appeals Court: Musk Can Tweet ‘Threats’ To Workers

I feel like it’s better for the world in general, and maybe especially for Tesla shareholders, when CEO Elon Musk doesn’t tweet. That’s just my personal opinion. Maybe you love it!

Does Musk have the legal right to tweet things? The National Labor Relations Board found that Musk’s tweet about workers losing stock options if they unionized was a threat and forced him to remove his tweet. It’s gone back and forth in the courts but, on Friday, the 5th U.S. Circuit Court of Appeals said it was protected speech.

“Deleting the speech of private citizens on topics of public concern is not a remedy traditionally countenanced by American law,” the court said.

The 5th Circuit is considered the most conservative appellate court in the country and has made a slew of recent decisions rolling back agency power, raising concerns that a ruling in Musk’s favor could weaken the authority of the NLRB to police employers’ speech for threats and coercion. The NLRB made the original determination that Musk’s tweet illegally threatened workers.

In a dissenting opinion, several of the judges said the court’s ruling “says zip about whether the NLRB is entitled to enforcement of seven uncontested Tesla labor violations” and ignores “whether Musk’s tweet was an unfair labor practice.”

The NLRB has been a thorn in Musk’s side and, if his friend wins the presidency, it’s quite possible that a Trump Administration will try to get rid of the NLRB.

The Trouble With Chips

My favorite potato chip company is Zapp’s, though I tend to vacillate between liking Cajun Crawtators or Hotter ‘n’ Hot Jalapeno flavors the most [Ed Note: Those can’t be real flavors, right? Crawtator? -DT]. Knowing this, my wife got me a huge box with 38 bags inside.

This was great for a minute and then suddenly a bit of a burden since I could not resist these chips.

Right now the world of semiconductors is dominated by Western-allied companies and, in particular, by Taiwan’s TSMC. Those chips are not supposed to go to China because a more advanced chip is necessary to get a lead in many areas of modern technology.

Being able to restrict these chips gives the United States and other governments an advantage so long as China can’t match what TSMC can produce.

In the past, this wasn’t a big issue for automakers as cars haven’t historically needed the most advanced chips to operate, say, the heated seats. The rise of driverless systems has changed this and now companies like China’s Huawei are trying to make advanced driver aids.

Since 2020, Huawei hasn’t been able to access TSMC chips but, uh oh, what’s this? Huawei’s latest AI chips were made by TSMC?

Bloomberg explains what’s going on here:

An investigation of Huawei Technologies Co.’s latest AI offering has unearthed an advanced processor made by Nvidia Corp. manufacturing partner Taiwan Semiconductor Manufacturing Co., suggesting that China is still struggling to reliably make its own advanced chips in sufficient quantities.

Canada-based research firm TechInsights recently took apart at least one of the Shenzhen conglomerate’s highest-end artificial intelligence accelerators and discovered an Ascend 910B chip manufactured by TSMC, according to people familiar with a recent teardown of the devices. They requested anonymity to discuss a report that isn’t public.

How did China get these chips?

BIS officials met with TSMC executives in mid-October about issues relating to the chipmaker’s supply chain, including whether third-party distributors may provide China the ability to access restricted technology, according to one of the people, who described the meeting as collaborative.

The world is a big place and if someone wants something badly enough it’s hard to stop them. On the flipside, this shows that Chinese chipmakers aren’t there yet.

What I’m Listening To While Writing TMD

For no reason at all, here’s Luis Fonsi and Daddy Yankee doing “Despacito.”

The Big Question

Should Volkswagen just break itself up at this point?

Top photo: Credit: Anton Lozovoy/depositphotos.com