Planned Factory Closures and Job Cuts
Volkswagen is gearing up for significant changes, including the closure of at least three factories in Germany and the elimination of thousands of jobs. Management aims to reduce wages by 10% for remaining employees as part of a broader strategy to streamline operations and cut costs, according to statements from employee representatives.
Downsizing Strategy
In its push to downsize, Volkswagen intends to outsource many tasks and entire divisions to outside service providers. Daniela Cavallo, Chairwoman of the General Works Council, stated at VW’s main facility in Wolfsburg that this plan signals a troubling trend in Germany’s largest industrial group, declaring, “All German VW plants are affected. None of them are safe!”
Profit Warnings and Market Challenges
The announcement of factory closures follows Volkswagen’s second profit warning in under three months. The manufacturer has faced declining demand in both the Chinese and European markets, coupled with difficulties transitioning to electric vehicles, resulting in significant financial strain.
Wage Cuts and Freezes
Along with the proposed 10% pay cut, Volkswagen plans to implement a wage freeze for 2025 and 2026. The company additionally aims to eliminate a monthly €167 collective bargaining premium and other bonuses, raising concerns among employees about their financial futures.
Potential Historical Impact
Should Volkswagen proceed with these closures, it would mark a historic first, as the company has never closed a factory in Germany during its 87 years of operation. Currently, VW operates 10 plants and employs around 300,000 workers in the country, amplifying the impact of any job losses.
Unions Demand Transparency
Unions are demanding clarity concerning Volkswagen’s future plans. Cavallo criticized the board for failing to present specific targets for the core brand and argued that cuts are unjustified without established goals. She also urged politicians to formulate a “comprehensive plan” for the electric vehicle transition to ensure Germany remains a competitive industrial center.
Government Response to the Situation
A government spokesperson acknowledged Volkswagen’s challenging position, emphasizing that past management decisions must not compromise employee welfare. The spokesperson reaffirmed the need to preserve and secure jobs as the company navigates its difficulties, aligning with calls from unions for accountability.
Upcoming Negotiations and Financial Reports
On Wednesday, union leaders will engage in a second round of collective bargaining negotiations with Volkswagen representatives. The company is also set to release its third-quarter financial results on the same day. In response to inquiries about recent developments, Volkswagen reiterated its commitment to restructuring for sustainable competitiveness, identifying productivity issues as a primary factor in the necessary changes.
SOURCE: Ref Image from Reuters
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