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Germany: Volkswagen considering plant closures and job cuts

September 2, 2024

Volkswagen has terminated a job security program and says it cannot rule out closures and redundancies amid a tough economic environment. Workers' representatives have promised to fight the plans.

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Volkswagen HQ in Wolfsburg, Germany
Workers' representatives have vowed to fight the plans, which Volkswagen says are due to a touch economic environment.Image: Daniel Kalker/picture alliance

German automobile giant Volkswagen said on Monday that it could not rule out factory closures and redundancies as it looks to cut back a reported €4 billion ($4.25 billion) more than originally planned in a sweeping savings plan.

The board said that the current strategy of offering reduced contracts and severance packages to employees nearing retirement was no longer sufficient to meet the company's targets, and announced it was terminating a job security program which has been in place since 1994.

"The European automobile industry currently finds itself in a challenging and serious position," said Volkswagen chief executive Oliver Blume.

"The economic environment has worsened and new competitors are pushing towards Europe. Germany is falling behind as a competitive location. As a company, we have to act."

Internally, Volkswagen's eponymous brand has fallen behind subsidiary brands Skoda, Seat and Audi. A range of cuts announced in 2023 was supposed to turn things around by saving around €10 billion by 2026, as Volkswagen attempts to streamline spending to survive the transition to electric cars.

But German finance newspaper Handelsblatt now reports that an additional €4 billion in savings also need to be found.

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Unions slam proposed job cuts

Meanwhile, workers' council chairwoman Daniela Cavallo has promised to resist the plans which she slammed as "an attack on our employment, our factories and our contracts."

Quoted by German news agency dpa, she said: "The very future of the Volkswagen [brand], the heart of the company, is in question and we will resist bitterly. There will be no Volkswagen plan closures with me!"

The IG Metall union called the announcement an irresponsible decision that "shakes the foundation" of the company, which is Germany's largest industrial employer and Europe's top carmaker in terms of revenue.

But Volkswagen brand lead Thomas Schäfer said: "The headwind has grown stronger. So, we have to push even harder to create the conditions for long-term success."

mf/wmr (dpa, Reuters)