“This looks more like a war”

Volkswagen apparently plans to close factories in Germany and cut tens of thousands of jobs. But ultimately it should be less dramatic. Overview.

Christopher Clausen, Kloft Mauritius/t-online

Volkswagen's Quake: The car company plans to cut tens of thousands of jobs and threatens steep pay cuts, according to the head of the employee representative body.

Daniela Cavallo told an information conference in Wolfsburg on Monday that the board wanted to close at least three Volkswagen plants in Germany, as well as separate divisions and regions. “None of us feel safe here anymore,” she said.

But what does this mean? How could it become like this? How can this crisis be avoided? The most important questions and answers.

Employee representatives say what are Volkswagen’s plans?

“The board of directors wants to close at least three Volkswagen plants in Germany,” Daniela Cavallo, head of the employee representative body, told an employee information conference in Wolfsburg. Cavallo said that in addition to closing Outside of factories, Volkswagen also plans to reduce production capacity at all remaining plants. According to previous company information, Volkswagen will be short of approximately 500,000 vehicles per year in order to fully utilize all locations.

Works Council president Daniela Cavallo warned of mass layoffs. Image: trapezoid

Cavallo continued that the board is also planning to make layoffs for operational reasons. Entire departments will be closed or moved abroad. For remaining employees, Volkswagen wants to reduce company tariffs by 10% across the board and require zero rotation in 2025 and 2026. On Wednesday, the company and the IG Metall union will hold a second round of negotiations on Volkswagen's collective bargaining agreement.

Is it really that bad?

For industry expert Jürgen Pieper, the information provided by the works council and employee representatives was exaggerated. “It sounds like the big clubs are being thrown here to get concessions,” he told Watson media partner t-online. He believes it is realistic for Volkswagen to save more than 10,000 employees, but it is more likely that employees will leave voluntarily or retire early. He believes that in any case, more than one factory is not at risk of closure. “And the possibility is only 30 to 40 percent.”

Which factories can be closed?

So far, it's just speculation. The small factory in Osnabrück recently lost a follow-up order that Porsche had hoped for and is considered to be at risk.

After supplier Kamann went bankrupt, Volkswagen took over the plant and began producing small series of niche models. However, these models have largely disappeared from the series. The Transparent factory, which employs around 300 people, and the plant in Chemnitz are also considered at risk. Volkswagen makes electric vehicles in both areas.

Volkswagen factory in Germany.Cartography: t-online

On the other hand, expert Jürgen Pieper said that the Zwickau plant is most likely to be closed: “It is not well utilized at all.” Only then will Volkswagen Osnabrück be closed. The work was so small that the end was merely symbolic. If the Emden plant were to close, the Lower Saxony state government would prevent it. As Volkswagen's main factory, the Wolfsburg plant is too important to close under any circumstances.

The last time Volkswagen closed a production base was more than 30 years ago: in 1988, Volkswagen closed its plant in Westmoreland, USA. The Audi subsidiary recently conducted tests at its factory in Brussels. The German Volkswagen factory has never been closed.

How could it become like this?

Like other German automakers, Volkswagen is in deep crisis. The background is that demand for electric vehicles is currently low. For example, unlike Toyota, Volkswagen has essentially opted for electric vehicles rather than hybrids, which may seem to make sense in the long run but is proving to be a hindrance in the current situation. Currently, consumers are mainly buying hybrid cars, which has encouraged Toyota and put Volkswagen into crisis.

At the same time, VW is contending with growing competition from China, where electric vehicles tend to be much cheaper.

“The situation at Volkswagen is very serious,” the automotive expert said. “Now IG Metall is putting public pressure on VW by announcing it will close three plants. This looks more like a war than a solution.”

In September, Volkswagen eliminated a job guarantee that had been in place for more than 30 years. From mid-2025, layoffs are likely to occur for operational reasons. Volkswagen has also mentioned closing factories, but so far has not given any numbers or locations. At the time, industry expert Jürgen Pieper told t-online: “The fact that Volkswagen is canceling job security shows how deep the company's crisis is.” It was a “unique step in the company's history.”

Today, the expert said: “For a long time, there has been an arrogance in the German car industry.” For a long time, people continued to rely on the areas they had long dominated: petrol and diesel cars. Tesla and Chinese manufacturers have long surpassed German manufacturers in many areas. “Previous electronics products from other manufacturers such as Volkswagen and Mercedes were not particularly successful and simply not popular.”

Core brand Volkswagen has struggled with high costs for years and lags far behind sister companies such as Skoda, Seat and Audi in terms of returns. The austerity plan introduced in 2023 should bring about an improvement, boosting results by 10 billion euros by 2026. Among them, administrative personnel costs should be reduced by 20%.

Volkswagen has so far relied on partial retirement and severance pay for layoffs; this spring it expanded the program again and set aside 900 million euros in severance pay of up to 474,000 euros for particularly long-serving employees.

What can politicians and unions do?

Some. “Lower Saxony is a member of Volkswagen's supervisory board and can prevent the closure together with the works council,” said expert Pieper. VW management may not be able to decide to close the plant alone. “Compromise will be necessary, but it will certainly be difficult.” Volkswagen makes substantial profits, so it won't be easy to justify closing the plant.

However, Pieper believes that the wisdom of blocking austerity measures in the current situation is questionable: if savings are too low, the risk for works councils is that the company will become increasingly weaker in the long term. “It is therefore necessary to take a bold step forward: either by closing factories or, more sensibly, by cutting wages and zero wages for the next few years.”

Politicians are taking greater risks: “The automotive industry is one of the last major sectors of Germany's future, and taking a step backwards here would lead to a serious loss of prosperity for the country.”

Car expert Ferdinand Dudenhöffer told t-online: “The core problem at Volkswagen is the rigid structure of Volkswagen in Lower Saxony, which allows almost no changes due to Volkswagen's unfortunate situation. “As long as the state holds a 20% stake and IG Metall maintains its strength in Lower Saxony, “Volkswagen will become a political company as long as creating the conditions for Volkswagen to compete in Lower Saxony remains a Sisyphus task,” he said. Dudenhoff continued.

What's next for Volkswagen?

Volkswagen faces huge investments in the future. Expert Pieper believes the group may not be able to deal with the problem without going into debt. That's why Volkswagen believes it urgently needs to save money by closing factories or cutting wages.

However, working beyond labor is incomprehensible. Instead, you have to communicate well, and both the company and the employee have to make compromises. “Volkswagen must make it clear: the old days of privileges and job security are over. But in the long term we have an opportunity to secure the company.”

Information comes from dpa and Reuters