VW eyes closing 3 German factories in cost-cutting push
The plan includes a 10% wage cut and shrinking all remaining sites in Germany
VOLKSWAGEN plans to close at least three factories in Germany as Europe’s biggest automaker tries to slash expenses to become more competitive.
Proposals to fix the struggling namesake VW brand include a 10 per cent wage cut and shrinking all remaining sites in Germany, said works council chief and supervisory board member Daniela Cavallo.
The plans underscore the extent of the crisis at Volkswagen, which has bungled a transition to electric vehicles and lost relevance in China, where it’s losing market share to local automakers. With European car sales still around a fifth below their pre-pandemic peak, the push in Germany may be a sign of what’s in store for peers elsewhere in Europe.
VW’s plans threaten “tens of thousands” of jobs in Germany, Cavallo said Monday in a speech to VW workers in Wolfsburg. “This is starvation, a weakening in installments.”
Chief executive officer Oliver Blume has pointed to high costs at the VW brand, which is struggling with waning demand in Europe and intensifying competition from BYD in China. Unionists are saying that workers are made to pay for boardroom mistakes, including a botched EV shift and bad pricing policy.
The cutback plans are set to intensify a conflict with unions and deal a blow to Europe’s largest economy struggling with stagnation and facing challenges from migration and higher energy costs to budget austerity and the war in Ukraine. They kick off a contentious week for Volkswagen, which is expected to post declining sales and profit when it reports third-quarter results on Wednesday.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
The cuts also include freezing wages next year and in 2026, Cavallo said, and abolishing one-off payments for workers that have stayed with the automaker for 25 and 35 years. She added that Porsche – also led by Blume – terminated its production relationship and future model planning with the Osnabrück factory.
Volkswagen declined to comment on the exact nature of the cuts, saying only that the situation is “serious” and that both sides have a responsibility to safeguard the company’s future.
“We are not productive enough at our German locations,” VW brand CEO Thomas Schäfer said, adding that factory costs are 25 per cent to 50 per cent above the company’s plans.
Volkswagen shares declined 1 per cent in Frankfurt as of 12.32 pm local time. The shares are down around 18 per cent this year.
The German automaker, which issued its second profit warning in three months in late September, is in a difficult period. While its premium brands including Audi and Porsche have been the carmaker’s biggest source of profit in recent years, they’re now struggling. Porsche on Friday said it’s weighing cost cuts and reviewing its model lineup after a demand slump in China hit its profits.
The announcement adds to a litany of profit warnings from European automakers. Mercedes-Benz Group is struggling with sagging China sales, BMW has been tripped up by an expensive recall, and Stellantis is getting hit by poor performance in the US.
Negotiations between management and labour have so far produced no results. A grace period will run out next month, with warning strikes at VW sites in Germany possible from Dec 1. BLOOMBERG
Share with us your feedback on BT's products and services
