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A tale of two cities and one employer
FALLOUT OF THE VOLKSWAGEN SCANDAL: TWO PROVINCIAL COMMUNITIES ARE AN OCEAN APART, BUT UNITED IN FACING AN UNCERTAIN FUTURE
Wolfsburg, Lower Saxony, Germany
This is the town that Volkswagen built — literally put on the map in 1938 by the Nazis in pursuit of their dream of a “People’s Car.”
Wolfsburg rode the company’s post-war boom to financial wealth and today the two are inseparable. There’s a top soccer club that wears the VW logo and plays in the Volkswagen Arena; Volkswagen’s headquarters and manufacturing plant take up much of its real estate. There’s a Volkswagen bank, a Volkswagen real estate dealer, and even a Volkswagen sausage factory.
So when it was revealed the carmaker had cheated on US emissions tests, causing shares to plummet, the mood darkened.
“People are feeling a little down, like heads will roll, and not up high but at the lower levels,” said 65-year-old Mark Graff, waiting outside the VW gates to pick up his daughter after her shift on the assembly line.
Graff, whose son also works at the plant, said there was worry that shifts would be cut.
Nobody thinks the coming months are going to be easy as the world’s top-selling car manufacturer struggles to deal with myriad legal and technical problems while trying to restore its image. The city council is already freezing spending and hiring.
When established in 1938 to build the People’s Car on Adolf Hitler’s orders, Wolfsburg carried an unwieldy name that translates as “Town of the ‘Strength Through Joy’ Car Near Fallersleben.”
With the use of foreign forced labourers, prisoners of war and concentration camp prisoners, the Volkswagen factory was quickly built. Instead of the People’s Car — what became the VW Beetle — it produced military jeep-type vehicles, V1 rockets and other military equipment.
Renamed Wolfsburg in 1945 after a nearby castle, today the town of 120,000 people has 120,000 jobs, drawing commuters from the surrounding area. Some 70,000 work for Volkswagen; many others depend upon the company.
Sumon Ahmed, a 24-year-old who was working at the plant for the summer, said he’d heard people saying they might not get their annual bonus — a hefty 5900 euros ($NZ10,250) for each employee.
“At least there will be a short-term effect with a decrease in profits, but in the long term we just don’t know,” he said, wearing his blue VW shirt as he started his afternoon trek home after his shift helping build the Golf and Polo models.
Most others coming off work refused to talk about the situation, circling the wagons — or Volkswagens, as it were — in support of their employer.
“Go to Mercedes; they also have dirty secrets,” barked one middle-aged man in a VW shirt.
It’s an understandable attitude, considering Wolfsburg — off the Berlin-Hanover highway in northern Germany — is the country’s financially strongest city thanks primarily to Volkswagen. Ingolstadt, home to VW subsidiary Audi, is in fourth place.
The trickle-down hasn’t taken long to reach Wolfsburg. Mayor Klaus Mohrs announced an immediate spending and hiring freeze at the council. Projects underway are being allowed to continue, but no new ones are to begin.
ING economist Carsten Brzeski said the scandal’s impact on the national economy is unclear, but “Volkswagen employs more than 270,000 people. Adding possible suppliers to the equation, Volkswagen accounts for roughly 1.5 per cent of German employment.”
At the Carl Hahn high school for business and administration, whose entrance shares an awning with a pedestrian tunnel that takes VW employees under a road and railway tracks to work, students who had been considering the company as a future employer were holding on to that hope.
“Once I’m done then I can imagine working for VW, but that doesn’t look so good now,” said 17-year-old student Tobias Batzdorfer, who has two years left in school.
Employers assemble the Passat sedan at VW’s Chattanooga factory.
Chattanooga, Tennessee, USA
Inside Volkswagen’s only US assembly plant there’s little hint of the scandal.
Sparks fly off robotic welding arms, new versions of the Passat sedan roll off the line and workers install equipment to build a new SUV billed as a key to reviving the company’s growth prospects in America.
“Nothing has changed, and the factory construction goes on,” spokesman Scott Wilson said at the sprawling factory where VW plans to add 2000 jobs as it expands the plant by 30 per cent.
But despite the business-as-usual feel, production of diesel-engine vehicles has been frozen.
Some Tennessee state officials fear for job prospects at the plant that currently employs 2400, where the average hourly wage is about $US21 ($NZ32.50) and perks include reduced-cost leases on VW vehicles with free insurance coverage.
“My primary concern is getting Volkswagen back to where they’re in a mode to sell cars,” Governor Bill Haslam said. “Because if they’re not selling cars, those 2000-plus people working in Chattanooga’s life is going to look different.”
The United Auto Workers union sees the plant as an enormous opportunity to gain traction in a region where Republican politicians are hostile toward organised labour, and officials frame their concerns in the most delicate possible terms.
Secretary-Treasurer Gary Casteel said the union has offered its help for Volkswagen to “emerge as a stronger and more responsible manufacturer.”
Volkswagen’s openness to unions has riled Republican Tennessee politicians including Haslam and US Senator Bob Corker.
Chattanooga state senator Bo Watson has called for an inquiry into the scandal, prompting company supporters to grumble that he wants to go after the company in its darkest hour.
Watson says the hearings are warranted, given the nearly $US900 million ($NZ1.4 billion) in incentives that state and local governments have poured into the project since VW announced it would locate the plant there in 2008.
Tennessee’s incentive package included everything from infrastructure and construction grants, tax credits and training funding to a “Volkswagen Chattanooga” sign on the roof that’s longer than two football fields.
The scandal hit at a delicate time for the company suffering from declining sales following a 2012 sales bonanza surrounding the introduction of the US-made Passat. Volkswagen sales in the US dropped 17 per cent during 2012-13 as the company didn’t offer competitive products in key markets like midsized SUVs and pickup trucks.
Volkswagen announced in July 2014, after repeated delays, that it would build the new seven-seater SUV in Chattanooga.
Then-CEO Martin Winterkorn said the announcement sent a “strong signal for the US as an industrial and automobile production location.”
Winterkorn resigned last month. But plant workers, the Chattanooga community and the state officials that still holds true.