VW CEO Herbert Diess has warned of catastrophic consequences for global economies.
It's been a tough couple of years for the automotive industry. The pandemic has done its fair share of damage and, even if we slowly return to normality, the effects are still being felt. As a result of factories shutting down, semiconductor chip shortages have placed severe pressures on carmakers, with many having to suspend production or remove features from vehicles.
But if VW's CEO is to be believed, that was nothing compared to what the industry will have to face next. Speaking to the Financial Times, Herbert Diess has warned that the Russian invasion of Ukraine could have severe ramifications for not only the automotive sector but Europe's economy too.
Diess said that further disruption of global supply chains could "lead to huge price increases [and] scarcity of energy and inflation." Along with other carmakers, VW has suspended production at its Russian plants, where the Tiguan and several other models are manufactured. However, its Zwickau and Dresden factories have been shuttered, as invasion-related supply issues hinder production. This has also affected Porsche, which has had to suspend production of the Panamera and Macan.
The current sanctions imposed on Russia (and the possibility that it could strike back by cutting off Europe's gas supply) have led to instability in the markets. The CEO continued, "if you imagine a scenario where we cut off business relations with Russia, which we probably would have to do if this conflict [does not cease], you could not buy energy anymore and this would lead to a situation that might impact Europe and Germany considerably."
Diess told the publication that while he was in favor of sanctions, it isn't a permanent solution to the issue. Negotiations are essential he said. "We don't want a never-ending war in Ukraine". The CEO remarks that the VW Group has managed to navigate not only the pandemic but the resultant semiconductor chip shortage too. The latest production stoppages are related to electrical wires usually supplied by Ukrainian companies.
Aside from wanton death and destruction, Putin's invasion of the once-peaceful democracy has the potential to affect the rest of the world. Rising prices, not only of cars and componentry but also fuel is a real threat to the lives of the American consumer, already strangled by the high cost of living. While companies have pooled together to hamper the Russian economy, the powerhouse also has the potential to fight back and cripple economies.