Management and the works council have been grappling with possible delays and plant closures for weeks. But now the conflict is increasing. Apparently concrete plans for significant measures are on the table for the second round of negotiations.
Dark clouds over VW headquarters in Wolfsburg: Management is planning tough restructuring measures in Germany.
Volkswagen employees are in shock. CEO Oliver Blume and VW brand manager Thomas Schäfer’s restructuring plans for Germany are much closer than previously feared. The board wants to close at least three factories in Germany and lay off thousands of employees, group works council head Daniela Cavallo said at an information event in Wolfsburg.
VW board criticized high costs in Germany
The second round of negotiations on the company’s collective agreement at Volkswagen between IG Metall and management is scheduled to begin this Wednesday. Although the trade unions are demanding 7 percent more wages and additional money for trainees, the management is thinking the opposite.
According to Cavallo, VW wants a general wage cut of over 10 percent and zero wages over the next two years. All locations should also downsize and entire departments should be closed or relocated abroad, Cavallo explained. According to “Handelsblatt”, there are additional measures on an internal “poison list”. It also applies to bonus payments in the highest tariff group to date, “tariff plus”, as well as bonus payments for employee anniversaries.
Management announced tough cuts in September and did not rule out factory closures. A short time later, the company canceled the employment guarantee that had existed for about thirty years. The group is struggling with the structural problems in the automotive industry, with weak demand and increased competition as well as self-made mistakes, for example in digitization and the transition to electromobility.
In a message to employees on Monday, Volkswagen stressed that the company is not making enough money from its cars at the moment and at the same time the costs of energy, materials and personnel are constantly increasing. “We are not productive enough at our German locations and currently our factory costs are 25 to 50 percent higher than we planned,” the statement said. This means that individual German labor is “twice as expensive as the competition”. It is clear that the labor costs in particular are too high in comparison internally and compared to the industry average.
Works council boss Cavallo announces bitter resistance
It is currently unclear how unions and employees will react to management’s plans. Due to an existing peace obligation, strikes are only possible from December 1st. Cavallo had already announced his opposition to plant closings and possible layoffs at the start of collective bargaining negotiations.
The state of Lower Saxony, which holds 20 percent of the voting rights in the Volkswagen Group, plays an important role behind the scenes. In an interview with the NZZ almost two weeks ago, Prime Minister Stephan Weil said that he had a clear expectation that the negotiations would produce solutions that were smarter than closing locations. Observers assume that Weil would prevent proposed plant closings with a veto on the supervisory board if necessary.
In any case, the crisis at VW has scared politics. We still have to wait and see what Volkswagen itself explains about the savings plans, said a government spokesman. The position of Chancellor Olaf Scholz (SPD) is clear – “that is, wrong management decisions from the past must not harm the employees”. It’s about maintaining and securing jobs, the spokesman said.
Sales in the car industry have not increased to previous levels after the corona pandemic. Around 2 million fewer vehicles are currently being sold in the EU than in 2019. Given that VW has a market share of 25 percent, the group is missing sales by around 500,000 cars. Of these, 300,000 belong to the VW brand alone. The total number corresponds to about two plants, CFO Arno Antlitz calculated a few weeks ago.
According to media reports, the group aims for additional savings of around 4 billion euros for the VW brand to achieve a 6.5 percent sales return specified by CEO Blume for 2026. Last December, cost reductions of over 10 billion euros were mutually agreed upon.
But since then the environment has further deteriorated. The problem child in the group is the core VW brand, which only got a 2.3 percent sales return in the first half of the year. This is the worst value of the twelve group brands. Even the Spanish brand Seat/Cupra achieves a return that is more than twice as high at 5.2 percent, while Skoda achieves 8.4 percent. One reason for this is the working conditions and wages at VW in Germany, which remain outstanding by internal comparison.
Two VW profit warnings already in 2024
While world market leader Toyota produced 11.2 million vehicles last year with 380,000 employees, Volkswagen needed about 680,000 employees for 9.2 million. Around 120,000 of them work in Germany, around half of them at the headquarters in Wolfsburg. The VW brand operates ten factories in this country, six of them in Lower Saxony, three in Saxony and one in northern Hesse.
According to the works council, the factory in Osnabrück is considered to be at particular risk of factory closure. The group currently produces the T-Roc convertible from VW as well as the Cayman 718 and the Boxster from Porsche. An expected follow-up order from Porsche’s corporate brand did not arrive until recently. The Transparent Factory in Dresden is also considered to be at high risk. However, the plants in Osnabrück and Dresden are smaller sites. Observers doubt that the savings potential will be enough to put VW on a solid footing in Germany. According to media reports, the closure of larger locations such as Emden or Zwickau also plays a role in cases.
Not only will the collective bargaining negotiations enter their second round on Wednesday, but the group will present its business figures for the third quarter after two profit warnings in recent months. It was only at the end of September that Volkswagen announced that it only expected a group margin of 5.6 percent for 2024 instead of the previous 6.5 to 7 percent. The operating result would probably be 18 billion euros. The company justified the correction with the weak performance of the VW brand, in light commercial vehicles and in the components division.
You can contact Frankfurt business correspondent Michael Rasch on the platforms X, Linkedin and Xing consequences.
