Volkswagen plans to close “at least” three factories in Germany, lay off tens of thousands of employees and reduce the size of its remaining factories in the country, the company’s employee group said on Monday.
The domestic factory closures would be the first in Volkswagen’s 87-year history and expose the challenges facing Germany’s largest manufacturer. The plans are already facing resistance from unions in the country, where Volkswagen employs 295,000 people, paving the way for possible strikes in the coming weeks.
Volkswagen has been negotiating with the unions for weeks about its plans to cut costs and restructure business operations.
“If VW confirms its dystopian course on Wednesday, the management must expect the corresponding consequences from our side,” Thorsten Groeger, chief negotiator for one of Germany’s most powerful unions, IG Metall, said in a statement on Monday.
Volkswagen’s works council, which represents workers and holds half of the seats on the company’s board of directors, said the planned cuts – which include a 10% cut in wages for all employees – were deeper than expected and “of historical dimensions’.
“All German VW factories are affected by this. None of them are safe,” works council chair Daniela Cavallo said in a statement. She said Volkswagen planned to move some production abroad or outsource it to other companies, and warned employees not to dismiss its proposals as merely a bargaining tactic.
“This is the plan of Germany’s largest industrial group to start the sell-off in its home country,” Cavallo noted.
Volkswagen, one of the world’s largest carmakers, has warned it needs a radical overhaul as the group faces increasing competition in China and declining sales elsewhere. The automaker is selling 500,000 fewer cars per year in Europe compared to pre-pandemic levels, equivalent to about two car factories, according to executives.
Volkswagen echoed these sentiments in a statement on Monday. “The fact is: the situation is serious,” said Human Resources Board Member Gunnar Kilian. “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 German factories were not productive enough and that factory costs were as much as 50% higher than what the company had budgeted, making individual factories twice as expensive as those of competitors .
“In addition, at Volkswagen we still perform 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” to reduce them when it resumes talks with unions on Wednesday.
The company did not respond to a request from CNN seeking clarity on the factory closures and job losses. It has previously said it would seek to end a labor protection agreement with unions in place since 1994 to “future-proof” the company.
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