German government to intervene in crisis facing Volkswagen

WOLFSBURG: German auto giant Volkswagen's troubles and warnings about potential plant closures requires government intervention, German Economy Minister Robert Habeck announced on Tuesday.

Volkswagen said on Monday that the company could no longer rule out mandatory redundancies and plant closures as part of major austerity plans aimed at turning around the carmaker's core VW brand.

Volkswagen has never closed a plant in Germany, and has not shut down a factory anywhere in the world since 1988.

Labour leaders at VW reacted with outrage to Monday's announcement and vowed to fight hard against any plant closures or layoffs.

Habeck said on Tuesday that steps must be taken to ensure that Germany remains a major auto producer and internationally competitive.

He added that he reached the decision to intervene after close consultations with partners.

"Everyone involved must live up to their responsibility for the employees at the plants," Habeck said.

Habeck acknowledged that automakers face enormous challenges shifting toward electric-powered vehicles and holding off foreign rivals.

German car manufacturers must keep up with this competition, he said.

Habeck called the automotive industry a cornerstone of Germany's economy, and "it should stay that way."

The major car manufacturers and their suppliers are good employers for tens of thousands of workers in Germany, "drivers of prosperity" across the country and important forces for innovation, Habeck said.

That is especially true at Volkswagen, one of the world's biggest auto brands, he said.

Habeck referenced renewed German government efforts to boost demand for electric vehicles for company fleets and argued that long-term planning confidence is crucial for keeping German auto production plants competitive.

EU rules mandate that only CO2-neutral vehicles may be registered from 2035, something that Habeck said will allow automakers to make long-term plans.

The de facto EU ban on new cars with internal combustion engines is highly controversial. In Germany, sales of electric vehicles have recently plunged after subsidies for private buyers expired.