Volkswagen faces significant job cuts and potential plant closures amid challenging negotiations for a new wage agreement, with the IG Metall union demanding a 7% wage increase. The company’s management stresses the need for “sustainable cost relief” to maintain jobs. Tensions escalated during prior negotiations with protests from thousands of employees. VW plans to cut salaries and eliminate bonuses to achieve substantial savings, while the state of Lower Saxony, a major stakeholder, faces a dilemma between dividends and job preservation.
Major job cuts are imminent at Volkswagen, with potential plant closures ahead. As the second round of wage negotiations approaches, significant gaps exist between employer and employee demands.
The divide between the negotiating parties appears substantial, making it hard to envision a workable compromise. The IG Metall union, along with the VW works council, is advocating for a seven percent wage increase for workers at Volkswagen’s facilities in western Germany. Meanwhile, the employer representatives have yet to present a formal proposal but suggested in initial discussions that ‘sustainable cost relief’ is essential for long-term job security.
Second Round of Negotiations Set to Occur Without Protests?
The first bargaining round took place at the end of September and was marked by significant protests, where thousands of VW employees gathered in Hanover to voice their opposition to the company’s cost-management strategies. The next negotiations are scheduled for the stadium in Wolfsburg, and it is expected to proceed without major protests. Nonetheless, some unrest has reportedly arisen at various VW facilities following communications from the works council about VW’s cost-reduction strategy, which includes potential plant closures, significant wage reductions ranging from 10 to 18 percent, and job cuts.
Salary and Bonus Reductions on the Horizon
As reported by Handelsblatt, Volkswagen is aiming to realize most of its cost savings through wage reductions. According to an internal document from the management, decreasing salaries along with the removal of bonuses and special payments could yield €2 billion annually, satisfying half of the savings target. VW had outlined its savings plans last December, specifying that it intends to save €4 billion by 2024 and a total of €10 billion by 2026.
Volkswagen to Propose Specific Demands
While the company has not officially disclosed any plans for plant closures or job cuts, this stance may soon change. Sources within Volkswagen suggest that they will ‘approach IG Metall with concrete demands.’ VW attributes its strict cost-cutting measures to insufficient income from vehicle sales and rising expenses for energy, materials, and labor. ‘This financial model cannot be sustainable in the long term,’ stated VW brand director Thomas Schäfer in an internal email to staff. He also noted that if the VW brand fails to regain competitiveness, future investments could be jeopardized, as explained by HR Director Gunnar Kilian.
Employee Concerns: ‘Fear is Paralyzing’
Experts Stress the Need for VW to Cut Costs
IG Metall is adopting a defiant stance, arguing that until the threats of plant closures and possible mass layoffs are taken off the table, trust will remain ‘damaged’. The union, mirrored by the works council, is asking for a comprehensive plan for the decade ahead from the management. Many industry experts echo this sentiment: Volkswagen needs to delineate a clear vision for the future, even as cost reductions become an unavoidable necessity. ‘Cost savings are crucial,’ asserts Helena Wisbert, a professor at Ostfalia University in Wolfsburg. She contends that the state of Lower Saxony has a responsibility to intervene in the escalating conflict between labor and management.
Challenges for Lower Saxony
Lower Saxony holds a 20 percent stake in VW and has two seats on the supervisory board. ‘The dilemma for the state is whether to prioritize high dividends or job preservation. Ultimately, it seems likely the state will opt for job retention,’ explains Frank Schwope, an automotive expert at the Fachhochschule des Mittelstands in Hanover. However, it is clear that all parties must come together to arrive at a compromise, especially given the urgent pressure on costs and competitiveness facing VW.
According to the works council, at least three manufacturing plants and tens of thousands of jobs could be endangered, with wage reductions also in the pipeline.
Following the Chancellor’s remarks, the Minister President of Lower Saxony has also weighed in, emphasizing that all parties must engage in addressing the crisis.
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NDR 1 Lower Saxony | Current Affairs | 30.10.2024 | 07:00 am