Germany, Sept 05 (Alliance News): Volkswagen is contemplating a historic move that could see the closure of its German factories for the first time in its 87-year history.
The German automaker, facing intense competition from Chinese electric vehicle (EV) manufacturers and a challenging economic environment, is exploring deep cost-cutting measures that include potentially terminating a longstanding employment protection agreement with labor unions.
In a statement released Monday, Volkswagen acknowledged that it could not rule out plant closures in its home country.
The company, which launched a €10 billion ($11.1 billion) cost-cutting initiative late last year, is struggling with declining market share in China, its largest market.
Deliveries to China dropped by 7% in the first half of the year compared to the same period in 2023, and the group’s operating profit fell 11.4% to €10.1 billion ($11.2 billion).
Volkswagen’s CEO, Oliver Blume, highlighted the tough economic conditions and increasing competition from new entrants, particularly Chinese EV brands like BYD, as significant challenges. “The European automotive industry is in a very demanding and serious situation,” Blume remarked. “Germany, in particular, is falling further behind in terms of competitiveness.”
As part of its strategy to address these challenges, Volkswagen is focusing heavily on cost reductions across its operations, including factory, supply chain, and labor expenses.
The company’s planned measures have met with strong resistance from labor representatives.
Thorsten Groeger, lead negotiator for IG Metall, criticized the proposal as “irresponsible” and warned that it threatens jobs and the company’s core operations. “We will not tolerate plans that the company makes at the expense of the workforce,” Groeger said.
Despite the current turmoil, Volkswagen remains committed to Germany as a business location. Thomas Schaefer, CEO of Volkswagen passenger cars, emphasized that the company would engage in urgent talks with employee representatives to explore sustainable restructuring options. “The situation is extremely tense and cannot be resolved through simple cost-cutting measures,” Schaefer acknowledged.
Volkswagen, which employs approximately 683,000 people globally, including around 295,000 in Germany, is facing a critical juncture as it navigates these turbulent times and seeks to adapt to the rapidly changing automotive landscape.
