Germany’s subdued performance is less concerning than the general mood in Europe’s largest economy suggests, according to Volkswagen Group.

“The mood is worse than the situation actually is,” Chief Financial Officer Arno Antlitz said.

“We have well-educated workers, we have technological and innovative strengths, we have a strong small-business sector.”

Germany is struggling to regain momentum following the pandemic, making it the only Group of 20 economy aside from Argentina forecast to contract this year, according to the OECD.

The country, home to a range of major chemical companies such as BASF that rely on competitive gas supplies is suffering from the combined impact of an energy crisis, and a lack of demand from China.
 
Red tape and changing demographics are adding to concerns that Germany is losing its appeal as a place to do business.

VW itself is struggling with a number of hurdles in the transition to electric cars, with an initially slow response to the shift compounded by internal errors and infighting.  
 
VW is working to lift returns at its long-struggling namesake brand to rein in bloated costs and inefficiencies that leave returns trailing competitors.

Any measures will need agreement from the company’s powerful labor union.

“We have great products,” Antlitz said during a meeting with reporters in Frankfurt. “But we also have to do our homework on the cost side to stay competitive as a company in Germany and Europe.”