Six months into the "Dieselgate" affair surrounding VW, the mood in
Wolfsburg - where almost half the population works at its giant car
factory or in related businesses - is as gloomy as Winterkorn's, and
shows little sign of recovering.
Volkswagen <VOWG_p.DE> remains mired in the scandal over its rigging
of U.S. exhaust emissions tests, facing a barrage of lawsuits and
grappling with a stalled German vehicle recall.
With workers fearing for their jobs and the dive in VW's fortunes
hitting Wolfsburg's municipal finances, few people see any light at
the end of the tunnel.
This appeared to include 68-year-old Winterkorn when he visited
optician Ehme de Riese on March 14.
"Winterkorn was visibly dejected," de Riese told Reuters. "He is
haunted by the question of what will happen to his life's work and
to the Volkswagen company."
Winterkorn was on a fleeting visit - de Riese said the engineer has
moved to Munich since the scandal ended his long career at the firm
which has its headquarters in Wolfsburg.
De Riese runs three branches in Wolfsburg, and supplies glasses to
half of VW's executive board. As such, he fears that heavy penalties
could force VW to scale back operations in the town, which lies
about 200 km (120 miles) west of Berlin.
To boost morale, he has spent 30,000 euros ($34,000) on pro-VW
newspaper advertisements and badges which are plastered all over his
central branch on the Porschestrasse, Wolfsburg's main shopping
street which is named after Ferdinand Porsche - creator of the
iconic VW Beetle.
PAINFUL SETBACK
Not all is bad. Deliveries across the VW group swung back into
growth in January and February, helped by incentives to buyers,
after falling for the first time in years in 2015.
But the feeling among businessmen and workers is that things now
look even worse than in December, when three months after the
revelations of the test rigging, VW finally held its first news
conference on the crisis.
Since then, the U.S. government has sued VW for up to $46 billion
for violating environmental rules and extended its inquiries to
cover bank fraud law, while a flood of private and investor lawsuits
has swept in.
Then this week, Germany's KBA motoring regulator said it was holding
up a recall of VW Passats that is intended to make them comply with
emissions regulations.
This is a painful setback for VW, which in November touted its
simple emissions fix for 8.5 million cars in Europe as a precursor
to pulling out of the crisis.
Even Moody's, which still has a relatively positive opinion of
Volkswagen compared with its fellow credit rating agencies, is
prepared for things to get worse.
"The emissions issue is likely to have a number of adverse effects
on Volkswagen's future earnings and cash flows, which may only
become visible over time," Matthias Hellstern, managing director of
Moody's corporate finance team in Frankfurt, told Reuters.
UNCERTAINTY
Earlier this month Winterkorn's successor, Matthias Mueller, warned
workers gathered in Wolfsburg that the scandal would inflict
"substantial and painful" financial damage. Gauging the full extent
of this would take years, he added.
At the same time, the company's powerful labour leader warned that
the extent of possible job cuts would depend "decisively" on the
level of U.S. fines.
"Should the future viability of Volkswagen be endangered by an
unprecedented financial penalty, this will have dramatic social
consequences," works council chairman Bernd Osterloh told more than
20,000 workers.
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People in Wolfsburg are also worried about VW's failure to agree
with U.S. authorities on how to fix rigged U.S. cars. Another
concern is a risk of internal strife at VW headquarters as managers
and labour bosses start hammering out a new wage contract next month
for 115,000 workers in western Germany.
"It feels like a persistent stream of bad news," said Thomas
Ilsemann, managing director of travel agency Flugboerse in the city
centre. "VW is anywhere but on solid ground."
Ilsemann said the main factor weighing on his business was fear of
terror attacks at holiday destinations.
Nevertheless, bookings by temporary VW staff, whose jobs are less
secure than those on open-ended contracts, are falling, he said.
Also, executives from some local component suppliers opted not to
attend the Detroit auto show, an industry fixture, in January.
The Wolfsburg car factory employs about 60,000 people in a town of
about 125,000. Covering an area three times the size of Monaco, the
plant built 815,000 cars last year.
VW has started to reduce temporary jobs, mainly in production, at
some of its German factories and plans to cut 3,000 office positions
by the end of 2017.
Only a few employees were willing to speak to the media outside the
factory gates. One who would, 48-year-old Jochen Schmelzer, said he
has stopped playing football fearing he might lose his job if
suffered a sports injury.
"Crises are part of life here in Wolfsburg but this one is
different," he said when arriving for the late shift. "We still
don't know the size of the damage. The uncertainty is the worst of
all," added Schmelzer, a father of two who has worked on assembling
the top-selling Golf since 2007.
BOUNCING BACK?
That said, VW will run 22 extra shifts making Tiguan, Touran and
Golf models in the first half of 2016 to service strong demand. Some
local people are determined to see the positive side - if not now,
then later.
"I have had my fill of bad news already," Wolfsburg Mayor Klaus
Mohrs said. "There is an element of uncertainty. But there is also
the feeling that things will get better afterwards.
"The attitude among people here is that we'll get out of this crisis
in two to three years."
Few towns are as dependent on a single company as Wolfsburg. Mohrs
said he expects business taxes to decline to about 130 million euros
this year, from 277 million in 2014, as VW's profits are hit by
fines, lawsuits and recall costs.
The carmaker set aside 6.7 billion euros in the third quarter last
year to cover the costs of vehicle recalls, and is expected to
increase the provisions next month.
When the scandal broke, Mohrs announced an immediate freeze on
municipal spending and a hiring ban.
Asked if penalties could undermine jobs at VW, he said: "I am not
relaxed on this matter ... but I think the implications will be more
visible at sites other than in Wolfsburg."
Ever the optimist, de Riese is planning to open a fourth store in
Wolfsburg in June, aimed at young customers.
"I'm adding a new brand, just like VW did in the good times," he
said. "It's important to bounce back, especially in such tough
times."
(editing by David Stamp)
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