- Potential cost-cutting measures at Volkswagen, including potential plant closures and job losses.
Volkswagen isn't ruling out shutting down factories and letting go of workers as part of its budget-cutting strategy. The company declared following a leadership meeting that it's also scrapping the previous job security agreement that protected workers from layoffs until 2029.
VW Board: Additional Measures Necessary
The board states: The various Volkswagen AG brands require extensive restructuring. "Even the closure of car and parts factories isn't off the table in this situation unless immediate measures are taken," they mentioned. Additionally, the previously planned job cuts through early retirement and severance packages are no longer enough to meet the desired savings.
CEO Oliver Blume: "The European automobile industry is facing a very difficult and severe situation. The economic climate has worsened further, with new competitors moving into Europe," he stated in a release. "Moreover, the German location is losing its competitiveness. In this context, as a company, we must now take decisive action."
The issue: The main Volkswagen brand has been grappling with high costs for years and lags significantly behind sister brands like Skoda, Seat, and Audi in profitability. A cost-cutting program launched in 2023 was supposed to improve results by €10 billion by 2026. However, the current bleak industrial climate has made matters worse.
Finding Four Billion Euros
To achieve the desired improvements, costs must now be reduced more than initially planned. According to "Handelsblatt," this could mean an additional €4 billion in savings.
The outcomes: "Given this, the company feels compelled to cancel the job security agreement that has been in place since 1994," the board mentioned.
What the worker representative says: Works Council Chair Daniela Cavallo announced strong resistance in a special edition of the worker council newspaper "Mitbestimmen." The plans are "an attack on our jobs, locations, and collective agreements. This puts VW itself, and thus the heart of the company, in danger. We will fiercely defend against this. There will be no VW plant closures under my watch!" Cavallo declared.
Majority in VW Supervisory Board
The employee representatives, along with the state of Lower Saxony, hold a majority on the VW Supervisory Board. To carry out its plans, the VW board needs the support of the worker council.
The VW board emphasized that the closure of car and parts factories cannot be ruled out if immediate measures aren't implemented due to the extensive restructuring required by Volkswagen AG brands. The company's previously planned job cuts through early retirement and severance packages are no longer sufficient to meet the desired savings, necessitating additional cost-cutting measures.
