Volkswagen Is Running Out of Time
The fate of Volkswagen explains yesterday's election results in Germany, with AFD securing a massive victory.
$Volkswagen AG(VLKAF)$ is down 67% from 2017 peak, and it is on a path towards bankruptcy in 5 years.
Its recent 8% jump after the union agreement is unwarranted.
They should close factories TODAY, but because of the pressure from the unions and the government, they will close in 2030-34. The unions and the government are not allowing Volkswagen to compete effectively. These delayed factory closures will cost billions and waste valuable time, when there is no time left.
This is literally the same thing that happened 2 years ago, when instead of major reforms, unions and the government pressured VW into small cuts and no plant closures. They should have closed plants already then.
In just 2 years since the previous agreement, the situation deteriorated faster than the company believed, and the same will happen again.
I expect that in 2 years VW will cancel this agreement and accelerate plant closures, because these plants are not competitive with $40K Chinese EVs, which are better at everything than all VW cars.
This is why giving unions too much power is terrible for the economy, they are simply gangsters who extort the company, not leaving enough for investment.
Under German corporate governance, half of VW's supervisory board is made up of labor representatives and union officials. They hold immense power, and their primary mandate is to stifle innovation, protecting jobs at all costs, even unproductive employees, and not maximizing long-term value.
My prediction is that in 2027, sales will be "worse than expected" and in 2028 VW will begin to post losses. This will cause a huge crisis and accelerated plant closures, which will be followed by a German government bailout and a Trade War with China.
Germans have blocked a tougher stance on China, because their car makers were making massive profits there. As those profits are essentially gone, Germany will remove its block to tougher measures.
This terrible mismanagement of the German economy by Merkel, Scholz, and the Unions is the reason why AFD is so popular.
To defeat AFD, Germany must immediately abolish the mandatory union representation on company boards, this is the root cause of all problems in Germany. This won't fix everything, but it is the first step.
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