Auto giant Volkswagen is no longer ruling out plant closures and compulsory redundancies in Germany as part of its cost-cutting programme at the core VW brand, the company announced on Monday.
Management at VW said they would be cancelling a long-standing agreement with labour representatives in Germany that ruled out compulsory redundancies through the end of 2029. The deal has been in place since 1994.
The company said that executives believe the namesake Volkswagen brand must be comprehensively restructured and current efforts to reduce the workforce through early retirement packages and voluntary severance payments won't be enough to meet savings targets.
"Even closures of vehicle production and component plants can no longer be ruled out in the current situation without rapid countermeasures," VW announced.
VW has not yet given any concrete figures on how many of the comapny's roughly 120,000 jobs in Germany could be lost, or indicated which plants might be shuttered.
The works council at VW, however, said top executives have indicated that at least one vehicle plant and one component factory in Germany are viewed as dispensable.
No Volkswagen plant has ever been closed down in Germany, and VW has not shut a production site anywhere in the world since 1988, when the Westmoreland plant in the United States was closed.
In addition to VW's main plant in Wolfsburg, VW has factories in Germany in the cities of Hanover, Emden, Osnabrück, Braunschweig, Salzgitter, Kassel, Zwickau, Dresden and Chemnitz.
Labour leaders appalled
Labour leaders at VW said they would wage an all-out battle against the plans.
Daniela Cavalla, who leads the works council at VW, called the plans "an attack on our employment, workplaces and collective bargaining agreements" in a special issue of the works council's newspaper, Mitbestimmen, which was obtained by dpa.
"This puts VW itself and therefore the heart of the [Volkswagen] Group in question. We will fiercely defend ourselves against this," Cavallo wrote to workers. "With me, there will be no VW site closures!"
The IG Metall trade union, which represents many VW workers, also reacted with outrage. Thorsten Gröger, the union's regional leader in Lower Saxony, where the company is headquartered, called it an "irresponsible plan" that "shakes the foundations of Volkswagen."
The western German state of Lower Saxony holds a substantial minority stake in the VW Group. Both the state government and labour have seats on the company's supervisory board and, if combined, would form a majority.
VW Group chief executive Oliver Blume, however, said stark decisions are necessary given the difficulties facing both VW and the entire sector.
"The European automotive industry is in a very challenging and serious situation. The economic environment has become even tougher and new suppliers are pushing into Europe," Blume said in a statement. "In addition, Germany in particular is falling further behind in terms of competitiveness. In this environment, we as a company must now act consistently."
The core brand Volkswagen has been struggling with high costs for years has lagged far behind other VW Group subsidiaries such as Škoda, SEAT and Audi in terms of returns.
A cost-cutting programme launched in 2023 is supposed to bring about a turnaround at Volkswagen and improve earnings by €10 billion ($11 billion) by 2026. However, current business struggles have further exacerbated the situation.
In order to still achieve the targeted improvements in earnings, costs would now have to fall more sharply than previously planned.
According to the German financial newspaper Handelsblatt, up to an additional €4 billion will have to be cut.
"The headwind has become much stronger," Volkswagen brand leader Thomas Schäfer said in a company statement. "We therefore need to step up our efforts and create the conditions for long-term success."
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