Historic moment for Volkswagen: Automaker plans to close ‘at least’ 3 German plants and cut thousands of jobs

Volkswagen plans to close “at least” three factories in Germany, lay off tens of thousands of staff and downsize remaining plants in the country, the company’s employee group said Monday.

The domestic factory closures would be the first in Volkswagen’s 87-year history, and they lay bare the challenges facing Germany’s largest manufacturer. The plans are already facing pushback from labor unions in the country, where Volkswagen employs 295,000 people, setting the stage for possible strikes in the coming weeks.

Volkswagen has been locked in negotiations with unions for weeks over its plans to cut costs and restructure business operations.

“If VW confirms its dystopian path on Wednesday, the board must expect the corresponding consequences on our part,” Thorsten Groeger, lead negotiator for one of Germany’s most powerful unions, IG Metall said in a statement Monday.

Volkswagen’s works council, which represents employees and holds half the seats on the company’s board, said that the planned cuts — which include slashing all workers’ pay by 10% — were deeper than expected and “of historic dimensions.”

“All German VW plants are affected by this. None of them are safe,” works council chairperson Daniela Cavallo added in a statement. She said that Volkswagen planned to move some production abroad or outsource it to other companies and warned workers against dismissing its proposals as simply a negotiating tactic.

“This is the plan of Germany’s largest industrial group to start the sell-off in its home country,” Cavallo noted.

A Volkswagen employee holds a placard reading "Hands off the collective agreement" during a VW works council event in Zwickau, eastern Germany on October 28, 2024. - Jens Schlueter/AFP/Getty Images

Volkswagen, one of the world’s biggest carmakers, has warned that it needs a radical overhaul as the group faces growing competition in China and slowing sales elsewhere. According to executives, the automaker is selling 500,000 fewer cars in Europe a year compared with pre-pandemic levels, the equivalent of around two car plants.

Volkswagen reiterated these sentiments in a statement Monday. “The fact is: the situation is serious,” human resources board member Gunnar Kilian said. “Without comprehensive measures to regain competitiveness, we will not be able to afford essential future investments.”

Thomas Schaefer, the CEO of Volkswagen passenger cars, added that its German factories were not productive enough and that plant costs were as much as 50% above what the company had budgeted for, making individual plants twice as expensive as the competition.

“In addition, we at Volkswagen still handle many tasks internally that the competition has already outsourced more cost-effectively,” he said.

Labor costs were also “significantly too high,” Volkswagen said, adding that it would make “concrete proposals” for reducing these when it resumes talks with labor unions on Wednesday.

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The company did not respond to a CNN request seeking clarity on the factory closures and job cuts. It has previously said that it would seek to terminate an employment protection agreement with labor unions, which has been in place since 1994, to “future proof” the business.

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