VW CEO Warns: German Automakers Have A 50-50 Chance To Remain Elite

Will Germany's automakers suffer the same fate as their Detroit competitors?

Whenever one thinks of automakers like Volkswagen, Audi, BMW, and Mercedes-Benz, adjectives like ‘premium’ and ‘luxury’ typically come to mind. That may be true today, as it has been for the past several decades, but Volkswagen’s newly appointed CEO, Herbert Diess, isn’t so sure about the future.

As Reuters reports, Diess earlier this week said that Germany’s automakers have a 50-50 chance of remaining the so-called elite brands in the years ahead unless they make drastic changes. Examples include building vehicles that meet strict new emissions regulations and adapting their supply chains. In fact, Diess believes it’s possible some brands may go out of business unless they reform and shift production to electric cars.

“From today’s point of view the chances are perhaps 50-50 that the German auto industry will still belong among the global elite in 10 years’ time,” Diess said at a conference in Wolfsburg, Germany. "We are all used to the fact that we have flourishing industrial metropolises around the central manufacturing plants of German carmakers and their suppliers, places where people like to live and work, but that's not guaranteed for eternity.”

Think Diess is completely out of his mind and these German automakers are simply too big to fail? Diess added that “If you look at the former bastions of the auto industry like Detroit, Oxford-Cowley or Turin, you understand what happens to cities when once-powerful corporations and leading industries falter.”

Remember, GM filed for bankruptcy back in 2009 because it failed to identify numerous industry changes and implement the necessary solutions. Anything is possible. But the fact that Diess is already ringing the warning bell is a good thing. He already knows a few issues that require immediate attention, among them cutting carbon dioxide emissions in Europe by 30 percent by 2030. Diess said VW must increase its fleet of electric vehicles to 30 percent of new car sales in order to meet that goal.

This will be possible but it’ll come at a price: the change over from combustion engines to EVs will cause the loss of 14,000 jobs at VW by 2020 because of in-house structural changes. While many of the decisions Diess will soon have to make are painful, especially for thousands of plant workers, the ultimate goal is VW’s survival, both as an automaker and a global industry leader.