For the first time in its ninety-year history, Volkswagen (VW), Europe’s largest car manufacturer and the world’s second largest, plans to close one of its production plants in Germany and make direct layoffs in order to reduce costs. Group boss Oliver Blume informed his management on Monday, September 2, citing a significantly deteriorated economic and competitive situation. Since then, the company has been in a state of flux. Operations RatioThe traditionally very powerful employee committee at VW opened hostilities. Daniela Cavallo, the president of the body, announced on Tuesday that she will lead “fierce resistance” in the face of what she considers a “Questioning the heart of Volkswagen”.
The austerity plan is one of the most radical ever announced in the company’s history. Volkswagen’s management is not only considering closing German factories, but has also discussed suspending a job protection agreement, which in principle runs until 2029. If implemented, these two measures would mark major turning points in the group’s history.
Due to the considerable influence of the Betriebsrat, which primarily negotiates these non-dismissal agreements, it is almost impossible for a VW employee to lose his or her job. When it comes to protecting German factories, it always takes priority in strategic decisions. This exceptional employee power, a product of the manufacturer’s unique history, is reflected in the group’s workforce: almost half of VW Group employees worldwide (684,000 people) work in Germany (300,000 people), while every third vehicle is sold in Asia.
Financial hemorrhage
At VW, cost-cutting plans often take the form of early retirement programmes and contract terminations. But the latest such programme, worth 10 billion euros, negotiated in the winter of 2023 with the Betriebsrat, did not have the expected effects. Speaking to the group’s executives, Oliver Blume recalled how the economic parameters have deteriorated in recent months: “New competitors are entering the European market and the German industrial sector is losing competitiveness.” In this context, conventional measures are no longer sufficient to stem the financial haemorrhage, he acknowledged.
No cost-cutting figures were officially announced at the meeting. But German media reported on Tuesday evening that the Volkswagen brand alone is expected to save an additional €4 billion compared to what was announced. Despite fairly stable sales in recent months, the Volkswagen brand’s financial situation has seriously deteriorated due to discounts on vehicle sales, rising wages, restructuring costs and the launch of new models. In the first half of the year, its operating margin plummeted to 2.3%, down from 3.8% last year. This is far from the 6.5% target that the brand’s boss had set for himself. In comparison, Stellantis generated an operating margin of 12.8% last year.
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