Volkswagen AG, the German automotive giant, is contemplating a significant restructuring that includes the unprecedented step of closing factories in Germany, marking a potential shift in the company's 87-year history. The move, driven by the need for deeper cost reductions and increased competitiveness, has ignited a fierce backlash from trade unions and political leaders.
In a statement released on Monday, Volkswagen Group CEO Oliver Blume highlighted the escalating challenges facing the European automotive sector. "The economic environment has become even tougher, and new players are pushing into Europe," Blume remarked. He also pointed out that Germany's position as a competitive manufacturing hub is diminishing, necessitating decisive action by the company.
Volkswagen's proposed restructuring involves not only potential plant closures but also an end to the company's long-standing employment protection agreement, which has been in place since 1994. This agreement has guaranteed job security for Volkswagen employees until 2029, but the company argues that abandoning it is essential for making "urgently needed structural adjustments."
Thomas Schäfer, CEO of Volkswagen's core brand, echoed Blume's concerns, stating that the situation is "extremely tense" and cannot be resolved through mere cost-cutting measures. He emphasized the necessity of discussions with employee representatives to explore sustainable restructuring options.
The potential plant closures, which would be the first in the company's history in Germany, have sparked significant opposition from unions. IG Metall, the leading industrial union, has condemned the proposed measures as "irresponsible" and a "massive threat" to jobs and the company's foundations. Thorsten Gröger, district manager of IG Metall, criticized the plan as "short-sighted" and warned of its potential to "destroy the heart of Volkswagen."
Daniela Cavallo, chair of Volkswagen's General Works Council, also voiced strong opposition. Cavallo accused the board of management of failing in their responsibilities and described the proposed changes as an "attack" on employment and collective agreements.
The unfolding dispute places Volkswagen in a challenging position. The company employs approximately 650,000 workers globally, with nearly 300,000 based in Germany. The workforce is heavily represented on the company's supervisory board, which includes labor representatives, and the German state of Lower Saxony, which holds a 20% stake in Volkswagen, typically aligns with union interests.
Historical precedents suggest that Volkswagen's attempts to implement major changes in its German operations have often met with resistance, sometimes leading to the departure of top executives. Former CEOs Bernd Pischetsrieder, Wolfgang Bernhard, and Herbert Diess all faced challenges in pushing through efficiency measures at Volkswagen's domestic facilities.
The current situation is compounded by broader economic pressures, including a slowdown in consumer spending and the ongoing transition to electric vehicles (EVs), which has added complexity to Volkswagen's cost management efforts. The company's core passenger brand has been particularly hard-hit, with profit margins remaining a concern.
