Volkswagen is considering shutting down up to three factories in Germany and laying off tens of thousands of workers as it aims to regain competitiveness in Europe amid declining sales and increased competition from China, according to the company’s top employee representative.
The proposed closures would mark the first in the 87-year history of Volkswagen, which is Germany’s largest employer, and would further impact the country’s already stagnant economy.
Employee representative Daniela Cavallo informed workers at the Wolfsburg plant that the closures are part of a plan presented by management to the works council. She stated that the company intends to close at least three factories, downsize remaining plants, divest core areas, and implement significant pay cuts for remaining employees.
Cavallo also mentioned that Volkswagen is contemplating workforce reductions at the remaining open plants, indicating that this could involve eliminating more products, shifts, and entire assembly lines beyond current reductions.
Volkswagen, the flagship brand of the Volkswagen Group—which includes Audi and Porsche—holds significant economic importance in Germany, with its history closely linked to the nation’s post-World War II industrial growth. Many local economies rely on Volkswagen and its well-compensated workforce.
The company has refrained from commenting on the specifics of the plan, stating it will provide details once an agreement is reached with employee representatives. However, management acknowledged that due to declining demand and rising competition, employment costs in Germany are excessively high, necessitating structural changes.
Gunnar Kilian, a member of the management board, emphasized that without comprehensive measures to regain competitiveness, significant future investments would not be feasible.
A spokesperson for German Chancellor Olaf Scholz suggested that “wrong management decisions” may have contributed to Volkswagen’s challenges, asserting that workers should not bear the consequences. The government aims to protect and secure jobs amid pressures to revitalize the struggling German economy, which is projected to contract by 0.2 percent in 2024.
Last month, Volkswagen indicated that factory closures might be essential for the brand’s continued relevance. The automotive sector is crucial to Germany’s economy, contributing approximately 564 billion euros ($610 billion), but it heavily relies on exports, particularly to China, where demand for German vehicles has declined in favor of locally produced electric models.
Since the pandemic, demand for cars in Europe has decreased by around 500,000 units, a figure Volkswagen management equates to the output of two of its ten German plants.
Additionally, Volkswagen is engaged in wage negotiations with the IG Metall union, which represents most of its workforce and is seeking a 7 percent pay increase. The negotiations were initiated earlier than usual due to the restructuring plans, with the next round scheduled for Wednesday.
Concerns among employees are growing, as expressed by Britta John, a Volkswagen employee and IG Metall spokesperson, who stated that the situation is discouraging and that workers are worried about their job security.