Volkswagen employees face upheaval as CEO Oliver Blume and VW brand manager Thomas Schäfer propose drastic restructuring, including closing at least three plants and significant layoffs. The management seeks wage cuts over 10% while acknowledging high operational costs in Germany, which are twice that of competitors. Tensions rise ahead of crucial wage negotiations, with the head of the works council promising strong opposition. Political leaders emphasize the need to protect jobs amid ongoing industry challenges and declining sales.
Volkswagen employees are currently grappling with unsettling news regarding drastic restructuring plans laid out by Group CEO Oliver Blume and VW brand manager Thomas Schäfer. Daniela Cavallo, head of the Group Works Council, revealed during an informational session in Wolfsburg that the management intends to shutter at least three plants in Germany and cut thousands of jobs.
VW Leadership Expresses Concern Over Rising Costs
The coming week marks the start of a second round of negotiations regarding the wage agreement at Volkswagen, involving IG Metall and management. Union representatives are advocating for a 7 percent salary increase and additional pay for trainees, while management is considering an opposite approach.
Cavallo noted that the company’s proposal includes a potential wage reduction of over 10 percent and no salary increases for the next two years. All locations are expected to see workforce reductions, with entire departments possibly being closed or relocated abroad. According to reports from “Handelsblatt,” an internal “poison list” outlines even more cuts, including bonus payments for higher salary scales and long-serving employees.
In September, management had signaled more severe cutbacks, including the cancellation of a decades-long job guarantee. The Group is facing significant challenges in the automotive sector, including a slump in demand, escalating competition, and self-inflicted issues like struggles with digital adaptation and the shift towards electric vehicles.
A memo to employees highlighted that Volkswagen’s current vehicle sales are insufficient to meet operational costs, which have risen for energy, materials, and labor. The company admitted, “We are not producing efficiently at our German sites, and our factory costs are currently 25 to 50 percent higher than planned.” Consequently, some German plants are operating at double the expense compared to competitors.
Resistance from Works Council Leader Cavallo
The response from unions and staff to management’s strategies remains uncertain. Strikes are only permissible after December 1 due to an existing peace agreement. Cavallo has already indicated strong opposition against potential plant closures and layoffs at the onset of wage negotiations.
Lower Saxony’s state, which holds a 20 percent stake in Volkswagen, is also actively monitoring these developments. Minister President Stephan Weil stated his hope for negotiations to produce more strategic solutions beyond mere site closures. Observers suspect that he might use veto power in the Supervisory Board to block plant shutdowns if necessary.
Political apprehension regarding the crisis at Volkswagen is palpable. A government spokesperson mentioned that the administration firmly believes that previous management errors should not negatively impact employees. Saving and securing jobs are paramount concerns, emphasizing the Chancellor Olaf Scholz’s position.
Since the pandemic, automotive sales have not rebounded to pre-2020 levels, with the EU currently witnessing approximately 2 million fewer vehicle sales than in 2019. Given that Volkswagen holds a 25% market share, this equates to about 500,000 lost sales–300,000 of which pertain directly to the VW brand. CFO Arno Antlitz recently noted that this shortfall is equivalent to the output of two manufacturing plants.
Media reports suggest the Group is targeting an additional €4 billion in savings from the VW brand to reach a sales return of 6.5 percent by 2026, a goal set by CEO Blume. Last December saw an agreement for cost reductions exceeding €10 billion.
However, conditions have worsened since then. The VW brand is particularly struggling, posting a return on sales of just 2.3 percent in the first half of the year, the lowest of all Group brands. In comparison, even Seat/Cupra and Škoda reported returns of 5.2 percent and 8.4 percent, respectively, showcasing VW’s challenges in maintaining competitive wage and work conditions in Germany.
Volkswagen Faces Profit Challenges in 2024
In contrast to global leader Toyota, which produced 11.2 million vehicles last year with 380,000 employees, Volkswagen manufactured 9.2 million cars using about 680,000 staff, with roughly 120,000 based in Germany.
Reports indicate that the Osnabrück factory, which produces the VW T-Roc convertible and various Porsche models, faces significant closure risk. The anticipated follow-up orders from Porsche have not materialized. Additionally, the Transparent Factory in Dresden is considered under threat, though its smaller scale may not yield substantial savings to stabilize VW operations in Germany. Consequently, larger sites, such as those in Emden and Zwickau, are also part of potential closure discussions.
As the wage negotiations resume, the Group is expected to disclose its third-quarter financial results following two profit warnings this year. Recently, Volkswagen