VW, hit by the crisis, is considering closing at least three German factories

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Employees of German car manufacturer Volkswagen attend an information event about management's latest savings proposals at the company's headquarters in Wolfsburg, northern Germany, on October 28, 2024
Employees of German car manufacturer Volkswagen attend an information event on management’s latest savings proposals on October 28, 2024 at the company’s headquarters in Wolfsburg, northern Germany. Photo: Julian Stratenschulte / POOL/AFP
Source: AFP

Ailing car giant Volkswagen plans to close at least three factories in Germany and eliminate tens of thousands of factories jobs As part of a drastic cost-cutting effort, employee representatives said Monday, calling the proposed cuts “of historic proportions.”

The plan drawn up by management, which affects the eponymous VW brand, also includes a 10 percent pay cut for all staff, the company’s powerful works council said in an update to staff.

Bosses also want to downsize remaining factories and move “entire departments” abroad or outsource them completely, the statement added, as thousands of workers gathered for meetings at the company’s factories across the country.

There was no immediate comment from Volkswagen bosses, with a spokesman citing the “confidential” nature of the talks with unions and the works council.

Financial daily Handelsblatt had previously reported that VW was seeking about four billion euros ($4.3 billion) in savings, including through factory closures, pay cuts and bonus cuts.

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The Volkswagen Group with ten brands employs more than 680,000 people worldwide, of whom approximately 120,000 work at the core brand VW in Germany
The Volkswagen Group with ten brands employs more than 680,000 people worldwide, of whom approximately 120,000 work at the core VW brand in Germany. Photo: JULIEN DE ROSA / AFP/File
Source: AFP

Factory closures in Germany would be a first in the company’s 87-year history.

“Volkswagen is shocking its workforce” with cost-cutting plans “of historic proportions,” the works council said in the statement after informing employees at all 10 German plants of the proposals.

“This is the plan of Germany’s largest industrial group to start the sell-off in its home country,” Daniela Cavallo, head of the works council, told staff at VW’s headquarters in Wolfsburg.

“The intention is to allow the areas where the plants are located to bleed dry,” she said. “And the intention is clearly to put tens of thousands of Volkswagen employees out of work en masse.”

The Volkswagen Group with ten brands has more than 680,000 employees people Worldwide, approximately 120,000 of them work at the core VW brand in Germany.

Volkswagen stunned employees in September when it said it needed deep restructuring and was considering significant job cuts as well as closing factories in its home territory.

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An alarm clock that warns that it is 'five minutes to twelve' at VW, held up by works council head Daniela Cavallo and negotiator Thorsten Groeger of the metal union
An alarm clock that warns that it is ‘five minutes to twelve’ at VW, held up by works council head Daniela Cavallo and negotiator Thorsten Groeger of the metal union. Photo: Julian Stratenschulte / POOL/AFP
Source: AFP

VW says the cuts are necessary because it is struggling with high production costs, a faltering transition to electric vehicles and increasing competition in its main market, China.

Rival car manufacturers in Germany’s flagship industry are facing similar headwinds, contributing to a broader downturn in Europe’s largest economy.

In Berlin, the government warned against massive job cuts at Volkswagen.

Chancellor Olaf Scholz’s position was that “possible wrong management decisions from the past should not come at the expense of employees,” spokesman Wolfgang Buechner said, adding that the focus should be on “preserving and securing jobs.”

‘Serious problems’

The works council acknowledged on Monday that VW had “serious problems”.

But employee representatives accuse VW leaders of mismanaging the group and putting profits ahead of building a sustainable future for the manufacturer, and have vowed to strongly oppose the cost-cutting measures.

Cavallo said Monday that the board still does not have a “plan for the future.”

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Volkswagen is considering closing several factories in Germany and cutting salaries as the ailing auto giant pursues a drastic cost-cutting plan
Volkswagen is considering closing several factories in Germany and cutting salaries as the ailing auto giant pursues a drastic cost-cutting plan. Photo: Julian Stratenschulte / POOL/AFP
Source: AFP

“What on earth are such cuts for?” she said, charging that “there is still no plan of attack on the table, no concept for the future product pipeline and no idea how to regain our technological leadership.”

She warned that tensions “could soon escalate,” hinting at possible strike action.

Volkswagen recently lowered its 2024 outlook and will report third-quarter results on Wednesday, which are expected to disappoint.

Volkswagen will also start a second round of wage negotiations with the IG Metall union on Wednesday. The union has asked for a seven percent pay increase, which Volkswagen bosses have rejected.

Volkswagen’s problems are the latest in a wave of bad news for the German economywhich is expected to shrink for the second consecutive year in 2024.

Source: AFP