Volkswagen AG is considering an unprecedented number of factory closures in Germany to make deeper cuts, dealing a further blow to Chancellor Olaf Scholz’s government.
The company said on Monday that the potential measures would target its main passenger car brand as well as other group operations, including an attempt to end the company’s agreement with unions to safeguard jobs until 2029.
Any closures would be the first in Germany in the company’s 87-year history, putting VW in a confrontation with powerful unions.
“The economic environment has become even more difficult and new players are entering Europe,” VW Chief Executive Officer Oliver Blume said in a statement. “Germany as a business location is falling even further behind in terms of competitiveness.”
A full-blown labour dispute would be a major test for the CEO — who also leads the Porsche sports car brand — after union clashes that have dogged several of his VW predecessors. The company has struggled to reduce costs at its namesake passenger brand, where profit margins have long lagged, efforts made difficult amid a transition to EVs and a slowdown in consumer spending.
According to a separate statement, works council chief Daniela Cavallo said VW’s management had failed, as meetings detailed how the company’s main brand, making the Golf and Tiguan models, was threatening to slide into losses. The company said it plans to close at least one major car-making factory and a components site in Germany, as well as scrap pay agreements.
VW employs around 650,000 people worldwide, around 300,000 of them in Germany. Half the seats on the company’s supervisory board are held by labour representatives, and the German state of Lower Saxony – which owns a 20% stake – often sides with trade union bodies.
Previous conflicts have ended or cut short the tenures of top executives including former CEO Bernd Pischetsrieder, former VW brand chief Wolfgang Bernhard and Blume’s predecessor as CEO Herbert Diess. All three sought to pursue efficiency, particularly in VW’s domestic German operations.
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