Volkswagen, the renowned German carmaker, is making some major changes that will affect its operations in its home country. The company plans to close down at least three factories, lay off thousands of employees, and reduce pay by 10%, as reported by the company’s union.
The decision to implement these deep cuts comes as Volkswagen is facing challenges such as weak sales and slow growth in the electric vehicle sector, especially with tough competition from Chinese manufacturers. The works council chief, Daniela Cavallo, stated that the company’s board is looking to shut down three factories in Germany and reduce capacity at its remaining sites to streamline operations and cut costs.
As the manufacturing sector in Europe experiences a crisis and concerns about widespread unemployment rise, Volkswagen is taking steps towards a significant restructuring. This restructuring may lead to tens of thousands of job losses, division closures, and potential relocation of operations overseas. Additionally, real-terms pay cuts of up to 18% are expected after a two-year freeze on wages.
All of Volkswagen’s German plants are expected to be impacted by these changes, according to the works council. The factory in Osnabrück, located in Lower Saxony, faces the threat of closure after losing a major contract with Porsche, a subsidiary of Volkswagen. However, political challenges may arise as Lower Saxony’s government is a significant shareholder in Volkswagen.
The works council also mentioned the possibility of industrial action if Volkswagen does not reconsider its plans, highlighting the concerns of workers facing job insecurity. The automotive industry as a whole is struggling with declining demand in key markets, rising interest rates, and the need for significant investments to transition to electric vehicles.
Volkswagen’s management has been in discussions with labor representatives since mid-2023 to address the worsening economic situation and the need for restructuring. The company stated that concrete proposals to lower labor costs will be presented during upcoming salary negotiations.
Gunnar Kilian, the head of human resources on the management board, emphasized the seriousness of the situation and the significant responsibility of all parties involved in the negotiations. The company cited shrinking automobile markets in Europe and rising costs for energy, personnel, and raw materials as factors contributing to the need for restructuring.
Thomas Schäfer, Volkswagen Passenger Cars’ chief executive, pointed out that the company’s German factories have higher labor costs compared to industry standards, indicating the need for adjustments to ensure competitiveness and sustainability.
In conclusion, Volkswagen’s decision to close factories, reduce jobs, and cut pay reflects the challenges faced by the automotive industry and the need for companies to adapt to changing market conditions. The impact of these changes on employees, communities, and the future of the company remains to be seen as Volkswagen navigates through this period of transformation.