Volkswagen to Shut Down German Plants, Lay Off Thousands in Strategic Overhaul

Volkswagen is planning closure of at least three of its plants in Germany. It has also planned mass layoffs that could affect tens of thousands of staff and shrink its remaining plants in Europe’s biggest economy. The plant closure and mass layoffs is as it plots a deeper-than-expected overhaul, as per company’s works council head, on Monday.

(Image Credit: volkswagen-automobile-berlin)

Volkswagen, Europe’s biggest carmaker has been negotiating for weeks with unions over plans to revamp its business and cut costs. This includes plan for closures of plants on home soil for the first time, a big blow to Germany’s industrial prowess.

VW plant closures for restructuring

Volkswagen reiterated on Monday that restructuring was needed and said it would make concrete proposals on Wednesday.

“Management is absolutely serious about all this. This is not sabre-rattling in the collective bargaining round,” Daniela Cavallo, Volkswagen’s works council head, told employees at the carmaker’s biggest plant, in Wolfsburg, threatening to break off talks.

“This is the plan of Germany’s largest industrial group to start the sell-off in its home country of Germany,” Cavallo added, not specifying which plants would be affected or how many of  roughly 300,000 employees of Volkswagen Group’s could face layoffs.

Volkswagen mass layoffs

Cavallo’s comments mark a major escalation of a conflict between Volkswagen’s workers and the management. This is as VW faces severe pressure from high energy and labor costs, stiff Asian competition, weakening demand in Europe and China and a slower-than-expected electric transition.

Salary cut at VW

Volkswagen also plans to cut salaries at the brand by at least 10% and freeze pay in both 2025 and 2026, Cavallo said.

Thousands had gathered in Wolfsburg, where the company has been headquartered for nearly nine decades. Blowing horns and whistles, workers insisted not a single plant should shut.

German factories not productive

Volkswagen said in a statement that it would make proposals for how to cut labor costs on Wednesday, when workers and management meet for the second round of wage talks and the carmaker releases third-quarter results.

Thomas Schaefer, who heads the Volkswagen brand division, said German factories were not productive enough and were operating 25-50% above targeted costs, meaning some sites were twice as expensive compared to the competition.

Labor may strike to revolt VW Germany plant closure

Unions have immense clout at VW, where labor representatives hold half the seats on the supervisory board and are, in theory, legally entitled to hold strikes from Dec. 1 as a tool to further escalate the conflict.

“If VW confirms its dystopian path on Wednesday, the board must expect the corresponding consequences on our part,” the IG Metall union’s negotiator Thorsten Groeger said, vowing fierce resistance.

Strikes, which had been threatened for the start of December, were now likely, Schwarz said.

More problem for German carmaker

German carmakers last week, with both Mercedes-Benz and Porsche vowing to step up cost-cutting measures after posting profit drops on a weakening Chinese market.

German carmakers also fear being caught in the fineline of a trade war between the European Union and China, with hefty EU tariffs on Chinese electric vehicles set to come into force this week.

Volkswagen stock update

Volkswagen shares were down more than 1% after the announcement. Shares of peer Mercedes Benz also fell. Volkswagen stock have lost 44% of their value over the past five years, compared with a drop of 12% for Renault  and a gain of 22% for Stellantis.

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