Volkswagen’s road to riches or ruin starts in this factory

Christoph Rauwald
Bloomberg News

Six months ago, Volkswagen AG plunked down a few dozen building containers next to its sprawling assembly halls in Zwickau, eastern Germany. The graceless space stands apart from the rest of the sleek plant, but it’s inside that the carmaker is really breaking new ground.

One module houses a walk-in time capsule curated with meticulous attention to detail. There’s a vintage bicycle and antique furniture; old books and black-and-white photos adorn the walls under the glow of light bulbs mounted on old-fashioned fixtures; hidden loudspeakers play the clip-clop of horses pulling carriages.

The not-so-hidden message Volkswagen wants to instill in the minds of its 8,000 factory workers being funneled through the installation: change is normal and necessary, and it’s coming here to Zwickau.

In this Tuesday, May 14, 2019 photo a train loaded with cars stand in front of the plant of the German manufacturer Volkswagen AG (VW) in Zwickau, Germany.

The factory represents Ground Zero for one of the most audacious bets in corporate history. It’s here that VW, the world’s biggest carmaker with annual production of more than 10 million vehicles, wants to prove it can morph into an electric-car champion and survive the end of the combustion engine.

Managing the switch is nothing short of open-heart surgery. In Zwickau, most of the factory space is being revamped while production continues. Some 9,000 tons of steel structures are moved, and only about a third of existing machinery can be re-used. With the revamp in full swing, extensive training sessions and seminars kicked off for everyone from assembly workers to engineers to managers. Electric cars may have four wheels, but they’re fundamentally different from current vehicles in almost every other respect, from the technical architecture to the way they’re assembled to the materials used.

“It’s like getting changed inside a wardrobe,” said Dirk Coers, the personnel chief of VW’s operations in the region, who is overseeing the transition and its effect on workers. “No one has done something like this before.”

The site is the world’s first car factory switching seamlessly from combustion engines to electric ones, and VW has a lot riding on the experiment, investing $33 billion to develop the world’s biggest battery-car fleet and move toward a lofty goal to become carbon neutral by 2050. Zwickau is the laboratory for Volkswagen’s grand reinvention. The site will become Europe’s largest car plant of its kind with annual capacity of 330,000 cars, just shy of Tesla Inc.’s targeted global deliveries this year. The ID. 3 will start rolling off assembly lines in November, and in 2021 the site will have ceased output of conventional cars altogether. All told, VW will sink 1.2 billion euros ($1.33 billion) into producing three VW electric cars, two for sister brand Audi and another one for Seat in Zwickau.

Volkswagen is placing a big bet on a battery-powered future.

At this stage, much of the work that will be taken over by machines is still performed manually as employees come to grips with the new tasks and cars. On a recent visit, three men were untangling cables for the dashboard, a step that will become fully automated to speed things up. The goal is to get to 800 cars a day in three shifts over time from currently about 760.

One major challenge is the weight of electric cars, which are heavier mainly because of the battery. The entire assembly line has to be revamped because the ID. 3’s chunky SUV sibling weighs 2.25 tons, more than the existing steel gantry can support.

To no small degree, Volkswagen was shocked into this massive retooling exercise by the diesel-cheating scandal that erupted four years ago this month, throwing the carmaker into an existential crisis and forcing it to radically rethink its future.

Undeterred by patchy charging infrastructure, VW plans for no fewer than 22 million units over the next 10 years and anticipates that by 2030 the electric-car share will surge to at least 40% of global deliveries. That lofty projection stands in stark contrast to the realities on German roads today. VW shipped only a handful rekindled battery-powered Golfs last year, and in all of Germany a meager 36,000 electric cars were sold.

“We know the stakes are high, no doubt about that,” said Thomas Ulbrich, a VW lifer and trained metal worker who climbed the corporate ladder to become a board member at the company’s main car brand. “But there is no valid alternative to our strategy.”