Interview with Volkswagen CEO Martin Winterkorn The Auto Industry Crisis 'Is Truly Brutal'

Volkswagen CEO Martin Winterkorn speaks with SPIEGEL about government bailouts for competitors, the worldwide slump in demand for cars and VW's chances of surviving natural selection in the auto industry.

SPIEGEL: Mr. Winterkorn, should the (German) government rescue Opel?

Martin Winterkorn: The government should stay out of it. It is legitimate for the government to come to a company's aid with isolated loan guarantees, but this should only apply for a transitional period. The government cannot become a bailout organization for companies on the verge of bankruptcy.

A Volkswagen worker at the company's Wolfsburg factory.

A Volkswagen worker at the company's Wolfsburg factory.

SPIEGEL: Is Opel on the verge of bankruptcy?

Winterkorn: I cannot be a judge of that, but it would, of course, be regrettable. All I know is this: The bailout of General Motors is not easy, given the intricate web of relationships that has grown over the years. Imagine if we wanted to spin off Audi today. I don't know how Audi could survive if the VW Group were to stop supplying this subsidiary, be it with parts, technology or expertise.

SPIEGEL: General Motors and Chrysler are almost broke. Fiat's chairman has said that the company cannot survive on its own. Saab has instituted bankruptcy proceedings. Is an elimination contest taking place in the auto industry today?

Winterkorn: It looks that way. I have just returned from China, where there are still about 200 different automobile makers. A weeding-out process is also take place there.

SPIEGEL: Aren't you at least somewhat pleased by the threat of your competitors' demise, because it makes the business easier for the VW Group?

Winterkorn: Of course, if one player disappears from the field, the others will see their opportunities improve. But no one escapes this sort of crisis unscathed. It starts with the discounts with which faltering manufacturers hope to revive their sales. In doing so, they bring down prices across the board. And then there are the suppliers. If one automaker fails, Bosch, Mahle, Conti and other suppliers have a problem. Their plants no longer operated at capacity, and it becomes more difficult for VW to negotiate attractive purchasing prices. It isn't fun for anyone.

SPIEGEL: A number of governments plan to rescue the auto industry in their countries with billions in rescue funds. The United States is bailing out General Motors and Chrysler. France is helping Renault, Peugeot and Citroën. Will the companies surviving in the end be the ones that get the most support, and not necessarily the healthiest ones?

Winterkorn: That could happen, which is why I take a very critical view of such government assistance programs. They're a step back to a distance past. Who are we, after all? We are in Europe, and we have the EU. Under these circumstances, France cannot massively support its industry and at the same time require the automakers to close their plants in Eastern Europe, if any have to be closed.

Falling demand

Falling demand

SPIEGEL: The German government also wants to help the auto industry. It has already earmarked €1.5 billion ($1.88 billion) for scrapping bonuses. Doesn't this chiefly promote the purchase of small Italian and French cars?

Winterkorn: We also benefit from it, and that's why such programs are okay. They do not exclusively help the companies in one country. It is important to ensure that we too will experience a significant boost as a result. And that is the case. Normally, about 2,000 people a day order a Volkswagen in Germany. That number jumped to more than 6,000 in February. Dealerships have been staying open until 10 p.m. on Saturdays. Based on order volume, this will be the best February in many years.

SPIEGEL: But doesn't the scrapping bonus mainly improve sales of the Polo, which is made in Spain?

Winterkorn: No. Sales of the Golf, the Touran and the Passat are also up. And how many parts for the Polo do you think are made in Germany? The engine, transmission, parts of the chassis, the steering system, sheet metal parts and steel -- a total of 60 percent. That's why the scrapping bonus is clearly having a positive impact on employment. But I do not believe that the amount of money budgeted for the plan is enough. The program should definitely be extended. Besides, the government takes in as much money in sales tax revenues as it spent on the bonuses.

SPIEGEL: If the scrapping bonus is really working, that is, if your order volume is up so significantly in February, why did VW reduce working hours for its employees?

Winterkorn: We are seeing this positive development in Germany, and it's important also to talk about that in the crisis. But the negative tendencies are, of course, the dominant ones. In January, car sales declined by 37 in the United States, by 28 percent in Europe, by 20 percent in Japan, and so on. Things are in decline everywhere. That's what makes this crisis so dangerous. It is truly brutal.

SPIEGEL: You have worked in the auto industry for almost three decades. Have you ever experienced a crisis like this one?

Winterkorn: None of us has ever experienced such a tailspin. There has been excess capacity in the industry for a long time. We were able to handle it, but then came the financial crisis. Even healthy companies are having trouble getting credit from the banks. This creates an explosive mix, and no one is quite sure what else we can expect.

SPIEGEL: Governments worldwide have had to nationalize banks to save them. Some countries even face the threat of national bankruptcy. Do you believe that the political world has responded appropriately to these challenges?

Winterkorn: The grand coalition in Berlin certainly has. Chancellor Angela Merkel, Finance Minister Peer Steinbrück and the junior ministers have acted very prudently so far. And if we manage to overcome this crisis with common sense and not too much new debt, things will eventually turn around. But I am not ruling out the possibility that things could get drastically worse first. Imagine this continuing for another two or three years. Then we won't just be talking about reduced working hours.

SPIEGEL: Does VW have to lay off workers and close plants? Productivity rises by 5 to 10 percent each year. If you want to secure the 329,000 jobs within the VW Group, sales will have to grow substantially. But now sales are even shrinking.

Winterkorn: At this point, no one in our company is considering layoffs or the like. By reducing working hours, we can ensure that no cars are being produced for warehouse inventory. Besides, we have a 35-hour workweek, which we can reduce to 28 hours. This allows us to cut back production and yet hold on to our core workforce. I don't anticipate any problems in this regard for this year. We will only have to start thinking about other options if things continue to deteriorate after that.


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