Volkswagen Burning Through $2.2 Billion a Week as CCP Virus Halts Production: CEO

By Reuters
March 27, 2020Germany
Volkswagen Burning Through $2.2 Billion a Week as CCP Virus Halts Production: CEO
The logo of Volkswagen is seen at their plant in Wolfsburg, Germany, on April 12, 2018. (Fabian Bimmer/Reuters)

Volkswagen may have to cut jobs if the CCP virus pandemic is not brought under control as the carmaker is still spending about 2 billion euros ($2.2 billion) a week, Chief Executive Herbert Diess told German TV channel ZDF.

The Epoch Times refers to the novel coronavirus, which causes the disease COVID-19, as the CCP virus because the Chinese Communist Party’s coverup and mismanagement allowed the virus to spread throughout China and create a global pandemic.

Diess told the Markus Lanz talkshow that the German company, which employs 671,000 people worldwide, was not making any sales outside China and was looking for ways to resume production elsewhere that wouldn’t endanger its staff.

“We need to rethink production. The discipline which we had in China we do not yet have at our German locations,” he said.

“Only if we, like China, Korea or other Asian states, get the problem under control then we have a chance to come through the crisis without job losses. It requires a very sharp intervention,” Diess said.

Demand in China is picking up again but production is only at half the level prior to the crisis, he said.

Volkswagen, the world’s biggest automaker by vehicle sales, has 124 factories around the world of which 72 are in Europe, with 28 in Germany alone. It suspended production in Europe earlier this month because of the pandemic.

wolfsburg volkswagen headquarter
A man standing in front of the Volkswagen factory building in Wolfsburg, Germany, on March 12, 2019. (Sean Gallup/Getty Images)

Volkswagen was working on ways to resume manufacturing with workers maintaining safe distances from one another, including by stepping up hygiene and disinfecting, Diess said.

“We are not making sales or revenues outside of China,” Diess, adding that Volkswagen still had to cover a high level of fixed costs of “around 2 billion euros a week”, he told ZDF late on March 26.

The carmaker, which owns the Audi, Bentley, Bugatti, Lamborghini, Porsche, Seat, and Skoda brands, sold 10.96 million vehicles last year. It also makes Ducati motorbikes as well as MAN and Scania trucks.

Pressure on Refinancing

VW’s Chief Financial Officer Frank Witter called on the European Central Bank (ECB) to accelerate purchases of short-term debt, the Financial Times reported on Friday.

He said the ECB should send “clear signals” and purchase the short-term debt, which often matures in as little as six or nine months, “as soon as possible.”

The ECB said last week it would prop up markets, including through the purchase of commercial paper, as part of a 750 billion euro plan ($826 billion) to boost asset purchases to contain the financial fallout from the CCP virus.

It remains unclear whether the ECB has started buying commercial paper. VW is one of Europe’s most regular corporate issuers of commercial paper.

“There’s a lot of pressure on the incoming money flow,” said Witter. “We have different diversified funding sources available but not all of them are as liquid as they were.”

German Chancellor Angela Merkel, Health Minister Jens Spahn, and a head of the Robert Koch Institute Lothar Wieler address a news conference on the CCP virus in Berlin on March 11, 2020. (Axel Schmidt/Reuters)

VW has the capacity to issue up to 15 billion euros ($16.5 billion) of commercial paper under its main funding program, with another 5 billion euros ($5.5 billion) earmarked for short-term debt in Belgium.

Its ringfenced financial services division has a separate commercial paper program with a 2.5 billion euro limit ($2.75 billion).

Witter said Volkswagen, which has yet to tap bank credit lines worth in excess of 20 billion euros ($22 billion), considered those facilities only as a back-up for when capital markets are shut.

In a separate interview with German paper Boersen-Zeitung, Witter said Volkswagen did not see the need to tap state aid to weather the crisis.

Passenger car sales were down 40 percent in March, Witter told the newspaper, adding that the company was reviewing whether its annual general meeting could take place on May 7.

For now, Volkswagen is sticking to its forecast of paying a dividend but it was looking closely at all investment and spending needs, Witter told Boersen-Zeitung.

A VW spokesman confirmed the remarks made to the papers.

By Edward Taylor

NTD News staff contributed to this report.

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