Volkswagen plans to close 3 German plants, cut jobs & pay
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The news: Volkswagen plans to close at least three factories, lay off tens of thousands, and impose a 10% pay cut across its German workforce, as the company grapples with intensifying competition from China, high operational costs and a sluggish transition to electric vehicles.
The company’s powerful employee council, led by Daniela Cavallo, revealed the restructuring proposals on Monday at a workers’ assembly, sparking union resistance. The council and IG Metall union hinted at future strikes if the weeks-long negotiations, set to resume Wednesday, don’t yield revisions to the proposals.
Volkswagen employees fear the cuts may mark the start of a broader downsizing of the carmaker’s German operations. Cavallo decried the moves as “sell-off plans” and accused VW management of passing boardroom missteps onto workers.
The context: The proposed domestic plant closures would be the first in the company’s 87-year history.
Volkswagen’s challenges reflect a broader crisis in European automaking, with competitors like Mercedes and Porsche also implementing cost cuts. German Chancellor Olaf Scholz’s administration is monitoring developments closely, amid concerns over further weakening Germany's industrial base.
The numbers: In September, Volkswagen issued its second profit warning in three months, citing high costs and weakening demand across key markets. It now expects its 2024 operating profit margin to be about 5.6%, down from a previous range of between 6.5% to 7%.
Shares in the carmaker, which reports quarterly results on Wednesday, fell as much as 2.4% on Monday before paring some losses.
What they said: “This is starvation, a weakening in installments,” said Cavallo. “This is the plan of Germany’s largest industrial group to start the sell-off in its home market.”
“We will break off the talks and do what a workforce has to do when it fears for its existence.”
Volkswagen declined to comment on the specifics of the cuts, saying it would present its proposals on Wednesday, when the company is also due to release its third-quarter results.
"The situation is serious and the responsibility of the negotiating partners is enormous ... Without comprehensive measures to regain competitiveness, we will not be able to afford essential investments in the future," Volkswagen Group board member Gunnar Kilian said in a statement.
VW brand CEO Thomas Schäfer said “we (VW) are not productive enough at our German locations,” adding that factory costs were 25% to 50% above budget.
Wolfgang Büchner, a spokesman for Chancellor Olaf Scholz’s administration, told reporters at a regular press conference on Monday that, “it is known that Volkswagen is in a difficult situation,” he said.
“Possible wrong management decisions must not be at the expense of the employees.”
The sources: Reuters , The Associated Press , The Financial Times , Bloomberg
