Volkswagen Says COVID-19 Shutdown Costs Are “Acute Economic Risk” To The Company

Volkswagen has come out and said that it may need to start slashing jobs if the coronavirus pandemic isn’t brought under control quickly. The company admitted on German TV that it was torching $2.2 billion in cash per week, every week, while production has been halted.

Chief Executive Herbert Diess said on Thursday that the company wasn’t making sales outside of China and was actively looking at ways to resume production that wouldn’t harm its staff, according to Reuters. 

“We need to rethink production. The discipline which we had in China we do not yet have at our German locations. 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. It requires a very sharp intervention,” Diess said.

While demand has picked up in China again, it is only half the level it was at prior to the crisis, Diess noted.

“We are not making sales or revenues outside of China and have a high level of fixed costs of around 2 billion euros a week.”

Meanwhile, the ECB is doing its best to prop up businesses for the time being. VW’s Chief Financial Officer Frank Witter called for the ECB to continue to accelerate purchases of short-term debt. Witter said he wanted to ECB to show “clear signals” that it would step in and buy 6 month or 9 month paper. VW is one of Europe’s most regular corporate issuers of commercial paper, Reuters notes. 

“There’s a lot of pressure on the incoming money flow. We have different diversified funding sources available but not all of them are as liquid as they were,” said Witter.

For now, the company will continue to pay its dividend but is looking closely at all of its spending and investment needs. 

Recall, we highlighted yesterday how auto sales in the United States and U.K. were plunging. Looking at a recent business update from Group 1 automotive, a company that owns and operates 186 auto dealerships along with 242 franchises and 49 collision centers, gave us insight into the collapse of the overall broader auto market.