Volkswagen to Close German Plants, Lay Off and Cut Salaries by 10%

Volkswagen's works council stated on Monday that the company is contemplating massive pay cuts and layoffs, as well as the closure or downsizing of its factories in Germany. According to union chair Daniela Cavallo, the Volkswagen management recently presented a plan to the union that includes a comprehensive 10% pay cut and a wage freeze for the years 2025 and 2026. Taking all factors into account, the council estimates that during this period, workers' wages will decrease by approximately 18%.

The union indicated that workers who have signed certain collective wage agreements will also lose bonuses and additional payments for employment anniversaries. The council is composed of a group of elected employees who represent the interests of the company's staff.

Cavallo stated that Volkswagen also intends to close three factories and reduce the scale of all other factories in Germany. In a statement released on Monday, she said, "Specifically, this means we will cut more products, production volumes, shifts, and entire assembly lines, far beyond what we have already accomplished."

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"All Volkswagen factories in Germany are affected. None are safe," Cavallo added.

She warned that mass layoffs are part of the automaker's plan and noted that tens of thousands of jobs are at risk. The council further stated that Volkswagen is planning to outsource some departments to external companies or to the automaker's overseas headquarters.

*Volkswagen's Dilemma*The union stated that the plan submitted by Volkswagen's management to the union is separate from the ongoing collective bargaining discussions. The next round of negotiations is scheduled for this Wednesday, when Volkswagen will also release its latest quarterly earnings.

Volkswagen said in a statement on Monday that the transformation is necessary due to economic conditions. Gunnar Kilian, Volkswagen's head of human resources, said that without significant measures to regain competitiveness, Volkswagen would be unable to afford further investments. He added that the restructuring would ensure the company's financial stability in the future.

Thomas Schäfer, CEO of Volkswagen Passenger Cars, said that the company is not earning enough from car sales, while costs for energy, materials, and labor are rising. He added that compared to Volkswagen's targets and competitors' costs, German factories have insufficient capacity and higher costs.

Volkswagen also said on Monday that it would propose suggestions to reduce work costs in the labor negotiations to be held later this week.

Volkswagen's stock price closed down by 0.46% on Monday.

Like many other German and European car manufacturers, Volkswagen has been struggling against the backdrop of the transformation to electric vehicles and general economic weakness worldwide. Last month, the company lowered its annual expectations for the second time in less than three months due to weaker-than-expected performance in its passenger car division.

In September of this year, General Motors warned of possible factory closures and said it would cancel a series of labor agreements. This includes agreements with employees in professional or leadership positions, temporary workers, and apprentices.

The company also said it would terminate the employment protection agreement that has been in place for its German employees since 1994.This statement was met with strong resistance from the workers' committee and Germany's largest trade union, IG Metall.

On Monday, Thorsten Gröger, the chief negotiator for IG Metall, stated that Volkswagen's latest plan was unacceptable and was a "stab in the heart of the hardworking Volkswagen employees."

He said, "If Volkswagen confirms its dystopian approach on Wednesday, the board should expect corresponding consequences from us."