Car giant Volkswagen intends to close at least three plants in Germany and cut tens of thousands of jobs, the leader of the firm’s works council told VW employees on Monday, prompting top executives to say VW had to make changes to stay competitive.
All the other VW plants in Germany will be downsized under the plan from management, Daniela Cavallo said at an event in Wolfsburg, where VW has its headquarters. Bosses were also planning an across-the-board pay cut, the works council leader said.
VW did not comment on potential factory closures or mass layoffs, but said that “concrete proposals to reduce labour costs” would be presented in upcoming collective bargaining talks.
Executives at the carmaking giant argued that high costs at German plants make deep cuts necessary, but did not comment directly on reports of plant closures or mass layoffs.
“We cannot continue as before,” Thomas Schäfer, the top executive at the Volkswagen car brand, said in a statement on Monday. “We are not productive enough at our German sites and our factory costs are currently 25% to 50% higher than we had planned. This means that individual German plants are twice as expensive as the competition.”
Cavallo and other labour leaders at VW vowed fierce resistance to cutbacks.
The VW brand has struggled for years with high costs, and its profits have lagged behind other VW Group subsidiaries such as Škoda, SEAT and Audi.
Strikes looming?
Cavallo issued a warning during her remarks to an open-air gathering of about 25,000 VW workers: “I can only warn all board members and everyone at the top of the company – don’t mess with us, with the VW workforce,” she said to applause.
The IG Metall trade union, which represents most of VW’s plant workers in Germany, also vowed to oppose any plant closures.
“This is a deep stab in the heart of the hard-working VW workforce,” said IG Metall’s Thorsten Gröger, the trade union’s district manager in the western state of Lower Saxony, where VW is based.
“We want to secure locations, capacity utilization and employment in the long term. If the management wants to herald the end of Germany, they must expect resistance that they cannot imagine!” said Gröger.
Uwe Kunstmann, head of the VW Saxony Works Council, which represents VW workers in eastern Germany, has already warned that the company faces a “hot winter” of labour unrest.
If VW management’s stance doesn’t change, employees will walk out in nationwide strikes by December 1 at the latest and paralyze VW operations, he said.
VW executive: ‘Situation is serious’
The Volkswagen Group has previously said that the brand would need around 500,000 more vehicle orders per year in order to fully utilize the production capacity at all Volkswagen plants.
“Without comprehensive measures to regain competitiveness, we will not be able to afford significant investments in the future,” Volkswagen’s human resources chief Gunnar Kilian said in the management statement.
“The fact is the situation is serious and the responsibility of the negotiating partners is enormous,” Kilian said.
Schäfer said that Volkswagen’s aim remains to increase the return on sales to 6.5% by 2026, which he contended is the only way to finance necessary future investments.
German economy wobbling
Like other German carmakers, VW invested heavily in the once-booming Chinese market but has recently faced stiff competition from upstart Chinese automakers. Those Chinese rivals are now pushing into the European market as well.
German automakers have also faced challenges with the transition to electric vehicles, with high investment costs and disappointing sales.
But the crisis at Volkswagen, Europe’s biggest automaker, has also shaken Germany amid broader fears of a loss of global competitiveness. The country’s economy is slumping, and high energy costs and rising wages have raised concerns that the important manufacturing sector may face long-term decline.
The automotive industry is a pillar of the German economy and closely associated with the country’s image, while VW is among its most iconic brands.
VW employs around 120,000 people in Germany, around half of whom work at the brand’s headquarters and main plant in the northern German city of Wolfsburg.
The VW brand operates a total of 10 plants in Germany, six of which are in Lower Saxony, three in eastern state of Saxony and one in the western state of Hesse.
In September, VW terminated a long-standing job security deal with labour unions that had been in place for more than 30 years. Layoffs are now possible from mid-2025.
Volkswagen has never closed a plant in Germany, and has not closed a plant anywhere in the world in more than three decades.
Government urges protection for workers
Cavallo on Monday again called on Volkswagen bosses to present a vision for the future of VW instead of individual cost-cutting measures.
“With us, there will be no salami-slicing tactics. No partial solutions and no lazy compromises. We are looking for an overall package,” she said. “Anything else will not work with us!”
The VW plant in Osnabrück, which recently lost a hoped-for follow-up order from Porsche, is particularly at risk of closure, according to the works council. Porsche is likewise a subsidiary of the Volkswagen Group.
Cavallo said that VW executives are also planning mass layoffs, with entire departments at risk of closure or relocation abroad.
“All German VW plants are affected by these plans. None of them are safe,” said Cavallo.
Executives from VW’s parent company are scheduled to meet labour negotiators from the IG Metall trade union on Wednesday for a second round of talks on a new collective bargaining deal.
At an initial meeting in September, Volkswagen flatly rejected IG Metall’s demands for a 7% pay increase and insisted on savings instead.
But Cavallo said on Monday that VW is now demanding a 10% pay cut and no other pay raises for the next two years.
Soon after the works council announcement, the German government urged Volkswagen to protect jobs.
Chancellor Olaf Scholz believed “possibly false decisions made in the past by management should not come at the expense of workers,” his spokesman said.
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