VW is burning through $2.2B a week as virus halts output

FRANKFURT -- Volkswagen Group may have to cut jobs if the coronavirus pandemic is not brought under control as the automaker is still spending about 2 billion euros ($2.2 billion) a week, CEO Herbert Diess told German TV channel ZDF.

VW is not making any sales outside of China and is looking for ways to resume production elsewhere that wouldn't endanger its staff, Diess told the Markus Lanz talk show on Thursday.

"We are not making sales or revenues outside of China," Diess said, adding that VW still had to cover a high level of fixed costs of "around 2 billion euros a week."

"We need to rethink production. We do not yet have the  discipline that we had in China at our German locations," he said. "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.

Demand in China is picking up again but production is only at half the level prior to the crisis, he said.

The automaker is working on ways to resume manufacturing with workers maintaining safe distances from one another, including by stepping up hygiene and disinfecting, Diess said.

VW employs 671,000 people and has 124 factories around the world of which 72 are in Europe, with 28 in Germany alone. It suspended production in Europe earlier this month because of the pandemic.

VW Group owns the Audi, Bentley, Bugatti, Lamborghini, Porsche, Seat and Skoda brands. The group sold 10.96 million vehicles last year. It also produces Ducati motorbikes as well as MAN and Scania trucks.

VW's Chief Financial Officer, Frank Witter, called on the European Central Bank (ECB) to accelerate purchases of short-term debt, the Financial Times reported on Friday.

He said the ECB should send "clear signals" and purchase the short-term debt, which often matures in as little as six or nine months, "as soon as possible."

The ECB said last week it would prop up markets, including through the purchase of commercial paper, as part of a 750 billion euro plan to boost asset purchases to contain the financial fallout from coronavirus.

It remains unclear whether the ECB has started buying commercial paper. VW is one of Europe's most regular corporate issuers of commercial paper.

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

VW has the capacity to issue up to 15 billon euros ($16.5 billion) of commercial paper under its main funding program, with another 5 billion euros earmarked for short-term debt in Belgium.

The company's ringfenced financial services division has a separate commercial paper program with a 2.5 billion euro limit.

Witter said Volkswagen, which has yet to tap bank credit lines worth in excess of 20 billion euros, considered those facilities only as a back-up for when capital markets are shut.

In a separate interview with German paper Boersen-Zeitung, Witter said VW did not see the need to tap state aid to weather the crisis.

Passenger car sales were down 40 percent in March, Witter told the newspaper, adding that the company was reviewing whether its annual meeting could take place on May 7.

For now, Volkswagen is sticking to its forecast of paying a dividend but it was looking closely at all investment and spending needs, Witter told Boersen-Zeitung.

A VW spokesman confirmed the remarks made to the papers.