Volkswagen plans to shut at least three factories in Germany, lay off tens of thousands of staff and shrink its remaining plants in Europe’s biggest economy as it plots a deeper-than-expected overhaul, the carmaker’s works council head said on Monday.
Europe’s biggest carmaker has been negotiating for weeks with unions over its plans to revamp its business and cut costs, including considering plant closures on home soil for the first time in a blow to Germany’s industrial prowess.
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 Volkswagen Group’s roughly 300,000 staff in Germany could be laid off.
The comments mark a major escalation of a conflict between Volkswagen’s workers and the group’s management, which is under severe pressure from high energy and labour costs, stiff Asian competition, weakening demand in Europe and China and a slower-than-expected electric transition.
They also heap further pressure on the German government to act on persistent weakness of its economy, which faces a second successive year of contraction with Chancellor Olaf Scholz’s coalition searching for ways to spur growth. Scholz trails in the polls with federal elections due next year.
Volkswagen said in a statement that it would make proposals for how to cut labour costs on Wednesday, when workers and management meet for the second round of wage talks and the carmaker releases third-quarter results.
“The situation is serious and the responsibility of the negotiating partners is enormous … Without comprehensive measures to regain competitiveness, we will not be able to afford essential investments in the future,” Volkswagen Group board member Gunnar Kilian said.
Here is some reaction to the news:
VOLKSWAGEN BRAND CEO THOMAS SCHAEFER:
“We are not earning enough money with our cars currently. At the same time, our costs for energy, materials and personnel have continued to rise. This calculation cannot work in the long term.
“So we have to get to the root of the problem: we are not productive enough at our German sites and our factory costs are currently 25-50% higher than we had planned. This means that individual German plants are twice as expensive as the competition.
“In addition, we at Volkswagen are still processing many tasks internally that the competition has already outsourced more cost effectively. This means that we cannot continue as before. We must quickly find a joint and sustainable solution for the future of our company.”
GERMAN GOVERNMENT SPOKESPERSON:
“It is well known that Volkswagen is in a difficult situation. (…) The Chancellor’s position on this is clear, namely that possible wrong management decisions from the past must not be at the expense of employees. It is now a matter of preserving and securing jobs.”
STIFEL ANALYST DANIEL SCHWARZ:
“The plans go far beyond market expectations. I believe this reflects a unique combination of unfavourable factors: competition in China, softening of demand in Europe, especially for BEVs (battery electric vehicles), stricter regulation.
“Of course, unions will disagree with the proposed measures. However, I find encouraging that unions seems to largely agree with the analysis that VW needs to take significant action.
“I think strikes are likely: one side asks for 7% wage increase, the other side offers >10% wage cut plus factory closures.
“It will not be easy to find a compromise. It will be interesting to see whether unions will limit strikes to VW brand factories (where it might hurt VW less) or also expand this to other brands, like Porsche, where the damage would be more significant.”
Via Reuters
