Volkswagen is considering closing factories in Germany for the first time, Reuters reports, underscoring the growing pricing pressure Europe's leading carmaker is facing from its Asian rivals.
On Monday, Volkswagen's board met with representatives of the unions, which, as Reuters notes, play a significant role in the company. According to the report, the first “major clash” between the new CEO Oliver Blume, described by analysts as a “builder of agreements,” and the employee representatives took place.
According to union members after the meeting, Volkswagen is considering closing one large car factory and one plant producing parts because they are deemed outdated.
CFO Arno Antlitz and Volkswagen brand boss Thomas Schaefer will speak to employees on Wednesday morning.
Trade unionists will defend themselves
Volkswagen works council chairwoman Daniela Cavallo, a member of the powerful IG Metall union, said she expected CEO Blume to also join the negotiations, adding that Wednesday's meeting would be “very uncomfortable” for the group's management.
Reuters reports that previous attempts to introduce such major changes in Germanymost recently in 2022 when Herbert Diess left his position as CEO, were thwarted by IG Metall.
Analysts have in the past identified Volkswagen's plants in Osnabrück, Lower Saxony, and Dresden, Saxony, as potential targets for closure. The state of Lower Saxony is Volkswagen's second-largest shareholder and on Monday backed its overhaul.
Tense situation
Volkswagen, which employs around 680,000 workers, said it was forced to end its job security programme, which has been in place since 1994 and prevents layoffs until 2029, adding that all steps would be discussed with the works council.
IG Metall says job security covers Volkswagen plants in Wolfsburg, Hanover, Braunschweig, Salzgitter, Kassel and Emden.
“The situation is extremely tense and cannot be overcome by business-as-usual cost-cutting,” Schaefer said in a statement.
Volkswagen, which is responsible for the majority of car sales across the Volkswagen Group (including Audi, Seat, Skoda, Bentley, as well as Porsche and Lamborghini), is the first brand to have decided to reduce costs by 2026, with the aim of achieving EUR 10 billion in cost optimisation to survive the market transformation.
The difficult economic environment, new rivals in Europe and the declining competitiveness of the German economy mean Volkswagen must do more, Blume told his management.
Volkswagen shares rose 1.2 percent after the announcement. As Reuters notes, the company has lost almost a third of its valuation over the past five years. The company faces numerous challenges in Europe, the United States and especially in ChinaThere, domestic electric vehicle manufacturers, led by BYD, are taking over market share.