potential cost-saving measures at VW could include closing facilities and layoffs
VW may shut down factories and lay off workers due to budget cuts in its primary VW brand. The corporation stated following a management meeting that it's abolishing the employment assurance that previously forbade job losses until 2029.
The corporation's leaders consider that the brands under Volkswagen AG necessitate a complete overhaul. "Even the shutting down of automobile-producing and component factories can't be ruled out in the present circumstance without prompt actions," they stated. The anticipated staff reductions via early retirement and severance packages are no longer enough to achieve the desired reductions in costs.
"A restructuring solely based on demographic trends isn't sufficient to achieve the necessary short-term structural modifications for heightened competitiveness," the company said in a statement. "As a result, the company is required to revoke the employment guarantee that has been in place since 1994."
Works Council protesting plans
Works Council chairwoman Daniela Cavallo voiced strong opposition to the plans. "These plans represent an attack on our jobs, locations, and collective bargaining agreements," she declared in a special edition of the works council newspaper "Mitbestimmen". "With this, VW is jeopardizing itself and thus the heart of the company. We will vigorously oppose this. There will be no VW plant closures with me!" The works council, in tandem with the state of Lower Saxony, holds a majority on the supervisory board.
CEO Oliver Blume justified the course of action due to the deteriorating conditions. "The European automotive sector is currently facing a very challenging and severe scenario. The economic situation has deteriorated even further, with new competitors entering Europe," he stated according to the statement. "Moreover, Germany's competitiveness has been decreasing. Under these circumstances, as a company, we must now take decisive action."
Core brand has been a concern for years
The core VW brand has been grappling with high expenses for years and trails significantly behind sister brands like Skoda, Seat, and Audi in terms of profit margin. A cost-cutting initiative launched in 2023 was intended to change the situation and enhance income by €10 billion by 2026. However, the current weak new business has intensified the situation.
To attain the desired enhancements, costs now need to be reduced more than planned initially. According to "Handelsblatt," this could amount to an additional €4 billion in savings. "The headwind has become significantly stronger," said brand CEO Thomas Schäfer according to the statement. "As a result, we must intensify our efforts now and create the conditions to be successful in the long term."
The corporation's decision to revoke the employment guarantee could lead to an increase in dismissals within the VW brand. The works council chairwoman strongly opposes these potential dismissals, stating that they would jeopardize the company and its employees.
Given the worsening economic conditions and the need to enhance competitiveness, additional cost-cutting measures beyond the initial plan may result in further dismissals within the VW brand.
