Volkswagen aims to shut at least three factories in Germany, downsize its remaining plants and lay off tens of thousands of staff, according to the company’s works council.
In a speech Monday at Volkswagen’s main plant in Wolfsburg, Daniela Cavallo , head of the worker’s representative council, said the auto giant also plans to cut workers’ pay by 10% and freeze pay increases for the next two years.
Volkswagen is under pressure to cut costs amid a tough economic environment, the need to invest in electric vehicles and increasing competition from Chinese EV makers in both China and Europe. The company recently slashed its sales and profit forecasts for the year, and last month warned that it was considering factory closures in Germany to boost its competitiveness.
Volkswagen’s suggestion that it might have to close a plant in Germany for the first time in its history has set up a battle with its powerful union. The next collective bargaining meeting between the company and its worker representatives is set to take place on Wednesday, and Cavallo said VW now risked escalating the situation.
“By that I mean that we will break off the talks and do what a workforce has to do when it fears for its existence,” Cavallo.
Volkswagen on Monday declined to comment on what it described as speculation about confidential talks with the works council and IG Metall union, but said the company is at a decisive point in its corporate history.
“The situation is serious and the responsibility of the negotiating partners is enormous,” the company said.
Volkswagen said its main task now is to secure its future and that it needed to find ways to keep investing in its business on a sustainable basis.
Company executives have previously said that Germany is falling further behind in terms of competitiveness as a manufacturing hub and that simple cost-cutting measures aren’t enough to address the challenges Volkswagen faces.
Labor costs in Germany are the highest in Europe, according to an analysis by the German Association of the Automotive Industry, while energy costs in the country have risen since it lost access to cheap Russian gas as a result of the war in Ukraine.
Other measures disclosed by Volkswagen’s works council Monday include removing a premium payment that forms part of a collective bargaining agreement that would see some employees take an overall 18% pay cut. Some work would also be moved abroad or outsourced to external providers.
While acknowledging serious problems exist in the industry, which need to be tackled by both the company and the German government, Cavallo said she disagrees with the solutions Volkswagen is considering.
“We are not far apart when it comes to analyzing the problems. But we are miles apart in our response to the problems,” Cavallo said.
undefined Write to Dominic Chopping at dominic.chopping@wsj.com
