Volkswagen (VW) is contemplating the closure of factories in Germany for the first time, a decision driven by the need for significant cost reductions to maintain competitiveness.
The potential closures represent a significant clash between Volkswagen’s CEO Oliver Blume and the company’s powerful unions. The Works Council has expressed strong opposition to the proposed cuts, promising “fierce resistance” to the plan.
According to the Works Council, Volkswagen has identified one large vehicle plant and one component factory in Germany as potentially redundant. Analysts have previously suggested that closures could include sites in Osnabrück, Lower Saxony, and Dresden, Saxony. Lower Saxony, which owns a sizable stake in Volkswagen, has encouraged the company to review its facilities.
In addition to considering plant closures, Volkswagen intends to discontinue its long-standing job security program, which has protected employees from layoffs since 1994. The company stated that all proposed measures would be discussed with the Works Council.
VW Brand Chief Thomas Schäfer acknowledged the difficult economic environment and stated that cost-cutting alone would not solve the problem. The company aims to save 10 billion euros ($11 billion) by 2026 as part of a larger restructuring effort to navigate the transition to electric vehicles.
Volkswagen’s stock rose 2.2% after the announcement, despite the fact that the company has faced significant financial challenges, losing nearly a third of its market value in the last five years.
Trade unions have criticized the potential closures, with IG Metall describing the plan as irresponsible and detrimental to the company’s core operations. The union and the Works Council argue that instead of closing plants and removing job protections, the emphasis should be on reducing complexity and increasing efficiency.
Arno Antlitz, Chief Financial Officer, and Thomas Schäfer, VW Brand Chief, will address staff and the Works Council on Wednesday to discuss the proposed changes. Daniela Cavallo, Chair of the Works Council, has stated that Chief Executive Oliver Blume is expected to participate in negotiations as well.
