Volkswagen : Making the digital transformation socially sustainable in the e-era is one of Volkswagen’s biggest challenges. How can it succeed in doing so? A conversation with Gunnar Kilian and Michael Sommer. ...

Mr. Kilian, Mr. Sommer, most people understand sustainability to mean environmental protection. But the term also has a social component. What is it all about?

Michael Sommer: According to the OECD, the three dimensions of sustainability are economic, ecological and social. If you miss out one part of this magic triangle, then you have a problem as a company. Social sustainability is often reduced to pure employment effects. This is important, but as a car manufacturer, you enable mobility for society as a whole. Here, it is important to consider different interests and needs, for example, between road users in cities or in the countryside.

What are the biggest challenges for socially sustainable mobility in the future?

Gunnar Kilian: In 2016, the company and works council addressed the issue very early and consistently with the Pact for the Future, asking ourselves: How do we have to reorganize Volkswagen and how will this affect employment? Since then, we have redirected many investments - fewer in conventional technologies, significantly more and permanently in electric mobility and digitalization. That's why we're building the electric motor in Kassel today, that's why we have the battery system in Braunschweig, that's why there's the Center of Excellence in Salzgitter. But it is also clear that electric vehicles can be manufactured more efficiently, which means that we cannot avoid adapting employment in the long term. We are succeeding at this with attractive partial retirement offers for the baby boomers and along the demographic curve. For the younger employees who are under 50 today, the most important thing is to have the perfect qualifications for new types of work. This will be one of our biggest tasks in the coming years, and of course we are already tackling it today.

Now, transformation is nothing new for the group.

Gunnar Kilian: Our industry has always evolved. For example, it has implemented automation in production for decades. What's new is the pace of change. For the ID.3 we only needed about four years from concept to launch, whereas previous vehicles took six, seven, or even more years. And we can be sure that the pace of change will continue to increase. We must therefore constantly review and update ourselves and our processes. Only then can we be successful. Transformation is therefore a continuous task.

Does that mean that the workforce should mentally prepare itself for continuing education?

Michael Sommer: This mentality has been around for decades, but there are three additional accelerators in the mobility industry. First, the change in drive unit means that about 30 percent of components are no longer required. Secondly, automobile companies are opening up to new mobility concepts and services, which require digital skills above all. And thirdly, since the diesel issues, we have increasingly been discussing the product itself: Do we actually still want a car? The current SUV debate shows this, although there is a diametrical difference between acceptance by buyers and the public debate. The pressure for transformation in the automotive industry is therefore particularly high. For Volkswagen, the challenge now is to find the best strategic HR instruments to shape the change. This will also reveal whether society is in a position to master the transition into a digital and decarbonized society in such a way that it is accepted by humans or not.

Gunnar Kilian: I'm sure that we'll succeed. We are already making good progress with qualifications today. For example, we are training 8,000 employees for the ID.3, some with special content on high-voltage expertise. That is working brilliantly, so for the direct areas we are well on our way. However, digitalization also poses particular challenges for the indirect areas. We urgently need more engineers with competence in software development. Software and vehicle technology are growing ever closer together. With the software training at our Faculty 73, we have opened a completely new chapter on qualifications. In the case of applicants to the faculty, we don't pay attention to their formal qualifications, but rather to their know-how and their willingness to learn. All in all, it will be more important than ever for knowledge work to keep the know-how in the company up to date. The performance of the human resources department is also important here. In order to successfully master this task in the long term, we are in the process of fundamentally restructuring the department.

In this context, how important is Volkswagen's decision to produce its own electric motors and batteries?

Michael Sommer: These decisions are central to Volkswagen's future viability. Here it was necessary to weigh the costs and benefits. It is very important and right that the Group has decided to start producing centralized e-components itself, even if outsourcing might have been cheaper.

Gunnar Kilian: We need the know-how from battery production to packaging and power electronics. It's about the core of our products. That's why we're developing it. Only if we have the know-how can we advance the technology ourselves and shape change ourselves.

The Sustainability Advisory Board of the Volkswagen Group is currently presenting a project on sustainable transformation. What exactly is it about?

Michael Sommer: There are already numerous studies on the question of how job mobility and qualifications change with e-mobility. But what we do not yet have is a concrete scenario. That's exactly what we're in the process of creating: How is the world of work in the Volkswagen Group changing in the digital e-era, be it at all locations worldwide, in all direct and indirect areas, in those closely related to or less related to production? For this we prepare a prognosis for each field of work, combined with an assessment: Are the existing transformation tools enough or do we need new ones? How do I make transformation practical? We developed the study with the Fraunhofer Institute for Industrial Engineering. It can help the entire industry, as well as comparable industries, to evaluate the right instruments for sustainable transformation. The analysis phase for all German Volkswagen operations is expected to be completed in August 2020. Then it's on to the proposals for transformation, so the search for new instruments.

An example?

Gunnar Kilian: In the future, plastics technicians will work in battery production. So they need an appropriate qualification, otherwise they won't be able to work there. So they have to acquire completely new skills while on the job. At Volkswagen, we have effective vocational training, and our skilled workers have sound specialist knowledge. However, many will have to build up new know-how that is unrelated to their own subject area. We will also develop those employees with potential into software developers. For the personnel transformation to succeed, we must act with foresight and responsibility. That's why we invest heavily in strategic HR planning and answer questions like these: How will the areas of responsibility change over the next three, five, or ten years? When do we have to qualify whom? With the planned study, we want to be able to provide answers to labor market questions in Germany and Europe that go beyond Volkswagen.

How do you want to organize employee qualification globally?

Gunnar Kilian: The Volkswagen Group Academy is active at our locations worldwide. Once we have gained reliable knowledge that can be transferred from German factories to the rest of the world, our educational organization differentiates the necessary training profiles accordingly and applies them analogously at other locations.

Customers are also entitled to social sustainability during the usage phase. To what extent can digitalization and e-mobility help to exclude fewer and fewer people from mobility, for example?

Gunnar Kilian: With the ID. Family, we want to make e-mobility attractive and affordable for millions of people. In doing so, we are making a very concrete and rapid contribution to social sustainability. In the medium term, there will also be a need to enable sustainable mobility with integrated transport concepts, for example for senior citizens, for people with disabilities, or for residents of remote regions.

Michael Sommer: We must not forget how much freedom and experience mobility has brought to people. At the beginning of the 20th century, the horizon of experience of an industrial worker was a maximum ten-kilometer radius. Today, in case of doubt, it is worldwide. The big question is: How can I get free and flexible mobility in the age of climate change? Hopefully, this will lead to differentiated mobility concepts. I'll say this pointedly: Having a car in downtown Berlin is a nuisance. If you live on the edge of town, you often have a problem not having a car. And if you live in the Uckermark, you are completely done for without a car. The common solutions for highly diverse mobility profiles can only run via highly intelligent, fully integrated traffic concepts.

How important is it for Volkswagen to drive the change from car manufacturer to mobility service provider forward?

Gunnar Kilian: I am convinced that the development and production of vehicles will continue to be an important core element of our business model in the future. To compare it with the aircraft sector: We are Airbus, not Airline. In addition, however, we will intensively position ourselves as a provider of intelligent mobility packages. Feedback from customers about MOIA in Hamburg or WeShare in Berlin, for example, shows that we can offer a wide range of services: there is a great need for that.