After CEO's appearance at Trump: Doubts about US billions for new Audi plant

The damage to Audi's image after CEO Gernot Döllner's appearance at a campaign event for US President Donald Trump was great. Now it seems questionable whether the plant that Döllner announced in the USA can even be built. Because there are increasing doubts in the VW Group as to whether the commitments made by the US for the $4 billion investment in Georgia can last.

Specifically, it's about billions in aid from the state of Georgia, and the Trump administration has apparently promised customs relief for the entire VW Group if Audi comes. Without this, the US project, which is intended to bring the ailing company back into the black overseas, may not be profitable.

The supervisory board of Audi's parent Volkswagen, which must approve the construction of the plant with 4,500 employees, has not yet received any contracts or quorum papers on the details of the agreements, reports the Handelsblatt. There are only “flowery declarations of intent” in a “Memorandum of Understanding”.

The agreement with Trump to only impose a 10 percent tariff instead of 15 percent on imports of vehicles from the entire VW Group from Europe from Europe is particularly uncertain. Audi did not want to comment on the information. “With Döllner’s appearance, we have made a dramatic advance,” the Handelsblatt quotes a “decision-maker from the Volkswagen Group.” However, Audi “got exactly zero security for it,”

The story fits with the statements of several VW grandees, according to which the construction of the plant does not yet have the approval of the company's highest supervisory body. This was also emphasized by Lower Saxony's Prime Minister Olaf Lies (SPD), who sits on the committee as a shareholder. Lower Saxony holds around 20 percent of Volkswagen. Nevertheless, Lies called the construction of an Audi plant in the USA strategically correct. This is the only way Audi can better develop the US market. However, jobs in Germany should not be displaced.

The factory plans have caused unrest among Audi employees in Germany. The group is in trouble because of sleepless electrification, the loss of markets in China and US tariffs. The Audi plant in Neckarsulm is threatened with closure.

Döllner's appearance at a Republican campaign event last Saturday drew harsh criticism in Germany. Döllner had made himself a “puppet” in a “propaganda show,” said VW general works council boss Daniela Cavallo. Federal Environment Minister Carsten Schneider (SPD) condemned the “unsavory circumstances”. In addition, Audi is “relying on fossil fuels and therefore on a dead horse”. The factory will only build large Audi SUVs with combustion engines.

Döllner admitted in an internal letter that his appearance had triggered “questions and a lack of understanding”. His press office spread that the Republican government in Georgia had urged the Germans: either Döllner speech with Trump or no deal. The company's internal rule that company representatives are not allowed to appear with politicians three months before elections was not really violated. Because the supervisory board was “informed” before Döllner appeared with Trump ten days before the US midterm elections.

Without the commitments from the Americans, the planned plant might not be profitable. The state of Georgia alone is expected to contribute up to $1.4 billion in subsidies. But that was negotiated with outgoing Republican Gov. Brian Kemp's team. He is no longer standing for election. It is not a given in VW supervisory board circles that his successors - regardless of their political stripe - will see themselves bound by his promises.

The Georgia Parliament, whose two chambers will be re-elected on November 3rd, would also have to decide on additional budget funds - parallel to the elections for the US Congress at the national level. After all, Georgia's economic developer Pat Wilson is said to have announced specific information about the subsidies "very soon".

Even more valuable over the years, but even more shaky, is the alleged promise from the Trump team to reduce the import tariff for VW by a total of 5 percentage points. The company paid 1.2 billion euros in customs duties to the US government for the 160,000 vehicles that Audi imported into the USA last year alone. Apparently it was only agreed with Washington that Audi could talk about it in mid or late November. Despite Trump's erratic trade policy, relief for individual companies is still unknown. And it is highly questionable whether the mercurial president will stick to his promises.

Meanwhile, dissatisfaction with Audi boss Döllner is increasing in Germany. His gig in Georgia was “hypocritical, submissive and politically a kowtow to Trump’s attempts at blackmail.” That's why he has to resign, says an online petition from Campact. This had 127,000 signatures by Thursday afternoon.