German carmaker Volkswagen is planning to shut at least three factories in its home country, lay off thousands of workers and cut pay by 10%, according to the company’s union.
The deeper-than-expected cuts come as the company faces weak sales and slow expansion in the electric vehicle (EV) sector amid tough competition from Chinese manufacturers.
“The board wants to close at least three factories in Germany,” the works council chief, Daniela Cavallo, told employees at VW’s headquarters in Wolfsburg. Its remaining manufacturing sites will reduce capacity, she said, citing information provided by management.
As Europe’s top economy suffers a crisis in manufacturing and fears of mass unemployment, VW is aiming for a fundamental restructuring to cut costs.
The works council said the factory in the northern city of Osnabrück, which recently lost a major Porsche contract, is likely to be on the chopping block, with redundancies expected across the workforce, amounting to tens of thousands of jobs and whole divisions closed or sent overseas.
“All German VW plants are affected by these plans,” Cavallo said. “None is safe.”
Volkswagen employs more than 120,000 people in Germany, about half of those in Wolfsburg.
The company, which operates 10 sites in Germany under the VW brand, sent shock waves through the country in September with an announcement that it was considering the closure of factories in Germany for the first time in its history. To return to competitiveness, it said it would abolish its 30-year-old employment protection agreement as part of an attempt to save about €10bn.
Volkswagen said in a statement on Monday that its management had been in talks with labour representatives since the middle of 2023 about how to proceed, and had made clear over the summer that the “worsening economic situation required a fundamental restructuring”.
It said management would put forward “concrete proposals to lower labour costs” at upcoming salary negotiations.
Gunnar Kilian, head of human resources on the management board, said: “The fact is, the situation is serious and the responsibility of the negotiating partners is enormous.” He confirmed unspecified factory closures and painted a dire picture of the company’s condition.
after newsletter promotion
He said the aim was to find a solution with the works council to “sustainably secure the future” of the company with “targeted investments in the future”.
“Without comprehensive measures to get competitive again, we won’t be able to afford to make these significant investments in the future,” Kilian said.
The company said the automobile market in Europe, of which its share amounts to about a quarter, had shrunk by two million vehicles since 2020 while costs for energy, personnel and raw materials had grown. The sector “is stagnating and will not recover in the foreseeable future”, it said.
Volkswagen cars’ CEO, Thomas Schäfer, said the company’s German factories had significantly higher labour costs than the industry standard.