Rumors of Volkswagen’s factory closure plans at its heartland, Germany, have shocked the automotive industry. Senior executives have begun discussion on VW Germany plant closures as a way to recapture resources and tackle the tough competition it faces from China’s EV machines. China remains its single biggest market but over the last few years, homegrown local brands have flourished bringing with them an assortment of their own offerings, entering the market at prices that are significantly more affordable.
News of VW’s plant closures has sparked an outcry among workers, kickstarting concerns about the relocation of jobs that have been reliably held by residents in Germany for over 87 years.
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Volkswagen Toys with the Idea of Factory Closures in Germany
Reports suggest that the talk of VW’s Germany plant closures comes as the company faces mounting price pressures from its Asian counterparts. Volkswagen’s consideration of factory closures in Germany is unprecedented and would be a first for the organization.
According to correspondents at NPR, Volkswagen has set its sights on its operations in Osnabruck and Dresden and is considering shutting down two plants. They estimate that 2,500 workers could lose their jobs as a result of the move but the company has big changes to make if it wants to shed the title of the “worst-performing European car maker” today.
From the company’s 2023 Annual Report, we know that it had 684,000 employees spread across its facilities last year. Nearly half of them can be found in Germany. With no major layoffs attributed to it over the years, the current numbers are probably just as high. This would mean that the company is bloated beyond measure, with more employees than is strictly necessary for business.
This brings us to the company’s plans to violate its own “no-layoff” pledge. Along with the shutdown, the drastic measure that the company is looking into will lead to the termination of an employment protection agreement that the company has had with labor unions since 1994. Volkswagen had previously committed to avoiding job cuts until 2029, but for now, they may violate the agreement and move forward with the cuts.
Highlighting the scale of the issue and the need for just as intrinsic of a solution, the company stated, “In the current situation, even plant closures at vehicle production and component sites can no longer be ruled out without swift countermeasures. The situation is extremely tense and cannot be resolved through simple cost-cutting measures.”
Referring to the situation as “demanding and serious,” Volkswagen CEO Oliver Blume has pointed out the need for decisive action in order to keep up with the competitive market. Both the U.S. and Europe have looked into slowing down the pace of Chinese EV cars entering the market by introducing bans or even higher tariffs, but for now, most automakers are losing to these vehicles within China and outside of it. Even Tesla has turned to extreme job cuts to deal with competition.
Union Reps Speak Out Against VW Factory Shutdowns
Volkswagen has been working on serious measures to turn things around since 2023 The company launched a cost-cutting program last year, which was aimed at saving €10 billion ($11.06 billion) by 2026. The agreements made between the organization and the union involved some small-scale reductions within the workforce, but more recently, these measures have been identified as insufficient to make a real difference to the organization.
The unions that represent the workers hold great sway within the region and refuse to accept the changes at VW without a fight. Daniela Cavallo, Volkswagen’s works council head and an IG Metall union leader, has blamed the management for failing to identify a competent strategy and using job cuts as an easier way out. “There will be no plant closures with us,” she said, a statement that echoes how the workers in the region feel about Volkswagen’s factory closure plans.
CNN provided a statement from IG Metall lead negotiator Thorsten Groeger, “Today, the board presented an irresponsible plan that shakes the very foundations of Volkswagen, massively threatening jobs and locations.” He went on to call the approach short-sighted and highly dangerous, explaining that factor shutdowns at VW would threaten the very heart of the company.
As the owner of 10 popular automotive brands, there are a considerable number of changes the automaker will have to look into if it wants to survive the industry-wide changes occurring right now, especially if it wants to stabilize its presence in the EV industry.
