Xinhua News Agency reported on October 29 that the Works Council of the German manufacturing giant Volkswagen informed employees on the 28th that the management plans to close at least three factories in Germany, lay off tens of thousands of employees, and downsize all remaining plants in the country.
Volkswagen employs about 120,000 people in Germany, with about half working at the headquarters and main factory in Wolfsburg. Volkswagen currently has ten factories in Germany, six in Lower Saxony, three in Saxony, and one in Hesse.
Works Council Chairwoman Daniela Cavallo stated, "All Volkswagen factories in Germany will be affected by these plans; no factory is safe." She did not specify which three factories would be closed or the exact number of layoffs. However, the Works Council mentioned that the Volkswagen factory in Osnabrück, Lower Saxony, is at the greatest risk because it just lost an order from Porsche, a Volkswagen Group brand.
The Volkswagen board in Germany has developed a plan to save about 4 billion euros on underperforming passenger car brands, which includes a 10% cut in employees' monthly salaries, a freeze on wage increases for 2025 and 2026, and the closure of some German factories.
"This means that, on top of the current situation, there will be a reduction in more products, output, shifts, and entire assembly lines, far beyond what has been done so far," Cavallo said, adding that Volkswagen's cost-cutting measures could threaten "tens of thousands" of jobs in Germany. Porsche has also terminated its production relationship and future model planning with the Osnabrück factory. Last Friday, Porsche indicated that it is considering cutting costs and reviewing its model lineup due to a decline in demand from the Chinese market affecting its profits.
Volkswagen CEO Oliver Blume has previously stated that closing factories and laying off workers are necessary measures for the group in the face of a difficult economic environment, fierce industry competition, and a weakening competitiveness of German manufacturing. All Volkswagen brands need a comprehensive restructuring to control costs and improve competitiveness. With the rising energy and labor costs in Germany, Volkswagen is at a disadvantage compared to other European competitors. Moreover, the environment is becoming more challenging with new car manufacturers entering the European market.
As early as early September, Volkswagen announced in a statement that, to further cut spending, the company is considering closing one car manufacturing plant and one component factory in Germany. This would mark the first time Volkswagen has closed factories within Germany since its founding in 1926. The plan to close German factories and mandatory off employees is expected to be completed by 2026. On September 11, Volkswagen was again reported to potentially cancel the employment security that its German workers have enjoyed for decades. The cancellation includes an agreement to guarantee employment at six German factories until 2029, which committed Volkswagen Group to no layoffs before 2029.
Volkswagen previously announced a cost-cutting plan to save 10 billion euros by 2026 and set a target operating profit margin of 6.5%. Cavallo previously stated, "I oppose any factory closure plans; workers should not pay for the company's management mistakes. We are about 3 billion euros short of the 10 billion euro cost-cutting plan proposed by the Volkswagen brand, but labor costs are a small part of that, and their contribution to completing the plan is very limited. The main reason Volkswagen is in trouble is not labor costs but the failure of the Volkswagen Management Board to fulfill its responsibilities." She believes that the leaders of Volkswagen have not prioritized the protection of jobs for German employees but are considering investing 5 billion euros in a partnership with the American new car company Rivian.
On September 25, Volkswagen began negotiations with Europe's largest industry union, the German Metalworkers' Union (IG Metall), focusing on job security and factory closures. The union firmly opposes factory closures and protects employees' rights, threatening Volkswagen with strikes that could paralyze the car manufacturer for weeks if the plans are implemented. So far, no progress has been made in the negotiations. The grace period is due to end in November, and warning strikes could start at Volkswagen's German factories from December 1.
Volkswagen is facing the challenge of electrification transformation. In the first three quarters of this year, Volkswagen's global sales reached 6.524 million units, down 2.8% year-on-year, with third-quarter sales of 2.176 million units, down 7.1% year-on-year. China is the market with the largest decline in Volkswagen Group's sales, with cumulative sales of 2.057 million units in the first three quarters of 2024, down 10.2% year-on-year.
On September 28, Volkswagen lowered its full-year performance forecast, expecting to deliver around 9 million vehicles in the global market, down from the previous expectation of up to 3% growth; sales revenue is expected to decrease by 0.7% to 320 billion euros
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