Gas alarm, Volkswagen is preparing for the worst: ready to move production

The energy crisis unleashed by the Russian invasion of Ukraine threatens to disrupt the European industrial landscape. Terror crosses the continent like a thrill, with industry in the front row fearing the worst: the colossus Basf with less than 50% of the necessary gas it would be forced to close the Ludwigshafen plant, a closure that would lead to a chain of 125 connected plants. Another reason for closing could be the price. German industrialists and trade unions look with relative confidence to the ability of politics not to let them down, especially starting next spring-summer, when the ability to replenish stocks will be measured. That is why those who can try to save themselves by devising alternative solutions. The group Volkswagenfor example, it could shift production out of Germany and Eastern Europe if a gas shortage persists.

The responsibilities of politics

The largest European carmaker said on Thursday that shifting production would be one of the options available in the medium term if the gas shortage were to last much longer than the winter. The Wolfsburg company has important plants in Germany, the Czech Republic and Slovakia, among the European countries most dependent on Russian gas. “As medium-term alternatives” the German group is thinking of “transfer of production capacity or technical alternatives, similar to what has become common practice in the context of challenges related to semiconductor shortages and other recent supply chain disruptions, ”said Geng Wu, the head of purchasing.

While claiming to have made the “best possible” preparations for the gas shortage for this winter, Volkswagen said it was concerned about the effect that high gas prices could have on suppliers. “Politicians must also curb the explosion. currently uncontrolled gas and electricity prices, ”explained Thomas Steg, the company’s external relations manager. “Otherwise, particularly energy-intensive small and medium-sized enterprises will have major problems in the supply chain and will have to reduce or stop production”.

The advantages of the Iberian price cap

Where could the Volkswagen group move part of the production? Southwestern Europe or coastal areas of northern Europe, which have better access to LNG cargoes by sea, could be prime targets, a spokesperson told Bloomberg over the phone. The group, which since 1 September has passed from the hands of Herbert Diess to those of the head of Porsche, Oliver Blume, already manages plants in Portugal, Spain and Belgium, countries that host LNG (Liquefied Natural Gas) terminals. As for Spain and Portugal, then, in addition to the presence of the factories at the automotive giant, the price cap which divides Europe and yet is already effective in the two Iberian countries. The wholesale price cap for gas was approved by the European Commission and made effective on 15 June. It will be in effect for one year. This is an 8.4 billion euro intervention: 6.3 billion for Spain and 2.1 billion for Portugal. The cap was set at 40 euros per megawatt hour for the first six months. It will then increase by 5 euros per month, up to 70 euros. The advantage for consumers should be there, even if not sensational, given the prices from which we start: an average saving of 15% on the bill, according to the Madrid government.

The other great European houses

Volkswagen is not alone, of course, in the search for a solution to the energy crisis. Last Tuesday the CEO of Stellantis, Carlos Tavares, spoke of an imminent “strategic decision” on energy production, to make the factories more autonomous. “It is very clear that even if we are making production sites more compact, we are talking about very large areas and large roofs, which we can use to produce energy, not only with solar systems,” said Tavares, recalling that “if there is a shortage of electricity, the sector that suffers the most is the industrial one and I have to maintain the sustainability of my business ». In short, the fourth largest automotive group in the world should announce its plans by the end of September.

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Gas alarm, Volkswagen is preparing for the worst: ready to move production


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