Volkswagen, the world’s largest carmaker, is set to shake up its operations with plans to close “at least” three factories in Germany and lay off tens of thousands of employees, marking a historic shift for the German automotive giant, CNN reports.
The news, announced by Volkswagen’s employee group on Monday, comes as the company grapples with growing competition in China and slowing sales worldwide. Executives have warned that Volkswagen needs a radical overhaul to stay afloat, citing a drop in European sales of 500,000 cars per year compared to pre-pandemic levels, equivalent to the output of two car plants.
This move would be the first time in Volkswagen’s 87-year history that it closes factories in Germany, a nation where the company employs a staggering 295,000 people. The announcement has already sparked outrage from labor unions, who have vowed to resist the cuts and potentially strike in the coming weeks.
Volkswagen’s works council, which represents employees and holds half the seats on the company’s board, described the planned cuts as “of historic dimensions” and deeper than expected. The proposed measures include a 10% pay reduction across the board, raising concerns about the potential impact on employee livelihoods.
Thomas Schaefer, CEO of Volkswagen Passenger Cars, acknowledged that German factories are not operating at optimal productivity and face significantly higher costs compared to competitors. He highlighted that some plant costs are 50% higher than budgeted, with individual plants costing twice as much as rival facilities. Schaefer also pointed to labor costs as “significantly too high,” promising to present “concrete proposals” for their reduction during negotiations with unions, which are set to resume on Wednesday.
In a bid to “future-proof” the business, Volkswagen intends to terminate an employment protection agreement with labor unions that has been in place since 1994. This agreement, which has provided a safety net for employees, is now seen as an obstacle to necessary restructuring.
The potential strike, which could begin as early as December 1st, could escalate the already tense situation. IG Metall, a powerful labor union representing Volkswagen workers, has declared that “tens of thousands” of employees are “ready to express their dissatisfaction with management.”
