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VW may shift production due to Russia cutting off natural gas

Volkswagen AG is looking for ways to combat the shortage in nature Airincluding shifting production around its global network of facilities, signals how the energy crisis caused by Russia’s invasion of Ukraine threatens to affect Europe’s industrial landscape.

Volkswagen, Europe’s biggest carmaker, said on Thursday that reallocating some of its output is one of the options available in the medium term if the gas shortage persists beyond this winter. . The company has major plants in Germany, the Czech Republic and Slovakia, which are among the European countries most dependent on Russian gas, as well as facilities in Southern Europe that source energy elsewhere.

“As mid-term alternatives, we are focusing on greater localization, transformation of production capacity or technical alternatives, similar to what has happened commonly. amid challenges related to semiconductor shortages and other recent supply chain disruptions,” said Geng Wu, Head of Purchasing at Volkswagen.

Russia’s decision to reduce gas supplies to Europe has raised concerns that Germany may be forced to consume its fuel. Recent news that gas reserves have reached 90% of planned levels have allayed fears of severe shortages this winter, but Germany faces the challenge of replenishing already stockpiled reserves. depleted next summer without Russia’s contribution.

A Volkswagen spokesman said by phone, Southwest Europe or the coastal areas of Northern Europe, both of which have better access to liquefied natural gas cargo from the sea, could be beneficiaries of any production shift. The Volkswagen Group already operates car plants in Portugal, Spain and Belgium, which have LNG terminals.

Labor barriers

To be sure, any major manufacturing shift away from Europe’s largest economy will face significant setbacks. VW has about 295,000 employees in Germany, and worker representatives make up about half of the company’s 20-member supervisory board. Any shift in production is likely to involve a limited number of vehicles rather than a wholesale factory closure.

While gas supplies to VW plants are currently secured, the company has identified potential savings in its European locations to cut gas consumption by “mid-double digits.” , said Michael Heinemann, CEO of VW’s power plant unit.

However, the automaker said it was concerned about the high effect gas price available on its suppliers.

“Politicians must also contain the uncontrolled explosion in gas and electricity prices,” said Thomas Steg, the company’s director of external relations. “Otherwise, small and medium-sized energy-intensive companies in particular will have major problems in the supply chain and will have to reduce or stop production.”

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