Volkswagen, Seeking to
Cut Costs, Considers German Plant Closures
For
the first time in its 87-year history, the automaker is considering shuttering factories
in Germany, citing the need to remain competitive.
Volkswagen
warned on Monday (02.09.2024) that it would consider closing factories in Germany
for the first time in its 87-year history and end a decades-old guarantee of job
security for workers, as it faces profitability problems amid increasing pressure
from Asian competitors.
The
company said in a statement that the measures were meant to shore up its namesake
brand, but it declined to provide any details.
“In
the current situation, even plant closures at vehicle production and component sites
can no longer be ruled out without swift countermeasures,” the company said. “The
situation is extremely tense and cannot be resolved through simple cost-cutting
measures.”
IG
Metall, the powerful union that represents German automotive
workers, responded by saying it would fight any job cuts. It added that Volkswagen
managers had told it that a cost-cutting plan announced last year was not working
and that additional savings worth “billions” were needed. Volkswagen declined to
confirm that number.
Last
year, Volkswagen and worker representatives agreed to measures that would save the
company 10 billion euros, or $11 billion, by 2026. But those plans, which included
job cuts largely based on attrition, are no longer enough, the company said on Monday.
“The
European automotive industry is in a very demanding and serious situation,” Oliver
Blume, chief executive of Volkswagen, said in a statement. “Germany in particular
as a manufacturing location is falling further behind in terms of competitiveness.
In this environment, we as a company must now act decisively.”
The
automaker owns 10 brands, including Audi, Porsche and Lamborghini, but its flagship
brand remains core to its identity and that of Germany’s storied history as an automobile
nation. But Volkswagen has faced falling sales, amid decreased demand in Europe,
especially for its electric vehicles.
Volkswagen’s
share of the Chinese market, its largest market, has shrunk as fast-moving domestic
rivals roll out affordable electric cars. Despite plans by the European Union to
introduce tariffs on imports of electric cars from China, those competitors are
starting to expand into Europe.
The
German economy, Europe’s largest, contracted in the months from April to June, shrinking
0.1 percent from a year earlier. The latest figures dampened hopes that the country
might be pulling out of stagnation, which analysts say is driven by high energy
and labor costs.
Shutdowns
of Volkswagen’s German factories would be a first for the company, which was founded
in Wolfsburg in 1937. But closing plants, as well as ending the agreement that provides
workers with job guarantees through 2029, will face stiff opposition from union
leaders and workers’ representatives, who hold half the seats on the company’s supervisory
board.
Daniela
Cavallo, a union leader and the head of the council representing Volkswagen workers,
blamed company management for failing to develop a competent strategy and instead
seeking to save by cutting jobs.
“We
will fiercely defend ourselves against this,” Ms. Cavallo said in a statement. “There
will be no plant closures with us.”
Clashes
with unions have cost several chief executives at Volkswagen their jobs. Already
the unions are gearing up for wage negotiations that are set to begin this fall.
Nearly half of Volkswagen’s 650,000 workers around the globe are in Germany.
“The
company — and the VW brand — are in a very dangerous situation,” said Ferdinand
Dudenhöffer, director of the Center
for Automotive Research in Gelsenkirchen, Germany.