Volkswagen is reportedly planning to close at least three plants in Germany, eliminate tens of thousands of jobs, and reduce pay by 10 percent, according to the company’s chief employee representative. This restructuring will be the first instance of domestic plant closures in the automaker’s 87-year history and will likely lead to a confrontation with German unions as the company employs 300,000 people in the country. Ten plants under Volkswagen’s core brand are at risk of closure.
The largest car manufacturer in Europe has indicated that decisive actions are necessary due to increasing competition in China, decreasing sales in other significant markets, and the need to manage the expensive transition to electric vehicles. Recently, Volkswagen issued its second profit warning in three months, attributing it to a “challenging market environment.”
On Monday, Volkswagen declined to comment on “speculation about the confidential talks with IG Metall and the works council,” acknowledging that the company is at a “crucial point.” The works council, which represents Volkswagen employees, holds half of the seats on the supervisory board.
Daniela Cavallo, head of Volkswagen’s works council, informed employees at the Wolfsburg plant that executives have two days to change their plans, hinting at the possibility of future strikes. She expressed concern that Chief Executive Oliver Blume was taking a significant risk by potentially ending discussions, which may lead the workforce to take further action to protect their jobs.
Volkswagen initially hinted in September about the possibility of plant closures in Germany; however, analysts were skeptical due to strong opposition from politicians and the works council. The state of Lower Saxony, a major shareholder controlling 20 percent of voting rights, has prioritized job preservation and often aligns with the works council.
Similar to other German automakers like Mercedes-Benz and BMW, Volkswagen is experiencing decreasing profits in China due to reduced consumer spending and an increase in market share by local brands like BYD. The company, which will announce its quarterly results on Wednesday, now anticipates an operating profit margin of about 5.6 percent in 2024, a decrease from its previous estimate of 6.5 percent to 7 percent. This prediction is further supported by Porsche, majority-owned by Volkswagen, reporting a 41 percent drop in quarterly profits, showcasing mounting pressures in the Chinese market.