The COVID-19 pandemic is claiming more than just lives, but also businesses large and small. Recently, one of the biggest car manufacturers in the world, Volkswagen AG, came forward to say how bad they’ve been hit by the global pandemic.
In an interview with German TV channel ZDF, Volkswagen CEO Herbert Diess, said the company was spending about €2 billion or AU$3.6 billion per week on fixed costs across its shuttered European factories.
Diess told the Markus Lanz talk show that the German giant, which employs around 671,000 people worldwide, was not making any sales outside of China and just like other major manufacturers such as Daimler, BMW, FCA-PSA and Ford, they need to restart production as soon as possible. Volkswagen can endure the shutdown and its costs for several weeks “but not indefinitely”.
Keeping the factories shuttered for an extended period will only result in job cuts, which nobody wants. “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," Diess said.
However, the company is attempting to revive production without putting the health of their employees in jeopardy. Diess said that Volkswagen was working on ways to resume manufacturing while maintaining high levels of hygiene while maintaining a safe working distance. He further stressed that following medical advice is key in combating the spread of the fatal disease.
In a separate interview, Volkswagen’s chief financial officer, Frank Witter, said to German paper Boersen-Zeitung, that Wolfsburg did not see the need to tap state aid to weather the crisis. Furthermore, Witter said the company has yet to even tap into their €20 billion (AU$35.9 billion) bank credit lines, as those facilities are reserved from when capital markets are shut.
The CFO called upon the European Central Bank (ECB) to accelerate its purchasing of short-term debt, reported the Financial Times. Witter said the ECB should send “clear signals” and purchase short-term debt which often matures in as little as six or nine months, “as soon as possible”. Witter’s call comes after the ECB announced plans to spend up to €750 billion or AU$1.347 trillion to help contain the financial fallout caused by the viral epidemic.
According to the same report, Volkswagen is able to issue up to €15 billion (AU$26.9 billion) in commercial paper (money market securities) under its main funding program with another €5 billion (AU$9 billion) via a separate market in Belgium. Volkswagen’s ringfenced financial service division, too, has a separate commercial paper program with a €2.5 billion (AU$4.5 billion) limit. For those not in the know, Volkswagen is one of Europe’s most regular corporate issuers of commercial paper.
“Providing funding opportunities is something essential in this crisis,” Witter said. “The earlier, the better.” He also said that for now, Volkswagen is sticking to its forecast of paying share dividends but it was looking closely at all investments and spending needs, as business conditions overall remain difficult to predict.
A Volkswagen spokesperson confirmed the remarks made to the papers. Stay tuned for more developments.