Volkswagen, a prominent German automaker, is contemplating shutting down some of its factories within its home country in what would be a historical move for the company, which has never closed a German plant before in its 87-year history.
CEO Oliver Blume informed employees that the company is considering deviating from a job protection pledge that has been in place for three decades, aiming to make significant cost reductions essential to maintain competitiveness.
The idea of factory closures and potential layoffs has sparked concern and outrage among worker representatives and politicians in Germany.
Volkswagen’s core brand, which bears the company’s name, has set a goal of achieving 10 billion euros in cost savings by 2026. However, with the European car market shrinking post-pandemic, Volkswagen finds itself with excess factory capacity, leading to increased expenses.
The company reported an operating profit of 10.1 billion euros in the first half of the year, down 11% from the previous year, attributing the dip to higher costs amid sluggish demand.
Challenges for Volkswagen include rising costs, slow sales of electric vehicles, and stiff competition in the market, particularly from Chinese manufacturers.
The proposed factory and job cuts at Volkswagen hold significance in Germany as the company is a symbol of the nation’s economic prosperity post-World War II. Volkswagen, with 10 plants in Germany, has never shut down a factory in its home country before.
Employee representatives, who hold significant influence in the company’s decision-making processes, are opposed to the proposed plant closings and emphasize the need for viable solutions beyond cutting labor costs.
Negotiations between management, employees, and government stakeholders are expected to continue over the coming months as Volkswagen navigates through its financial challenges and seeks to remain competitive in the evolving automotive industry.
