Crisis-hit auto giant Volkswagen said on Friday it planned to cut 35,000 jobs in Germany by 2030 after reaching an agreement with unions on a drastic cost-cutting plan.
The German group said the deal, reached at the end of marathon talks with labor representatives, would save Europe’s biggest carmaker about four billion euros ($4.2 billion) a year.
But the powerful IG Metall union hailed the agreement, which came just in time for Christmas and ended the strikes, because it avoided forced redundancies and plant closures.
Volkswagen originally said it was considering closing production sites in Germany, which would have been an unprecedented move in the carmaker’s 87-year history.
Management argued that the situation at the eponymous mass-market Volkswagen brand, which employs around 120,000 people in Germany, was “critical” and demanded immediate action.
VW has struggled with the transition to electric vehicles as it grapples with increasing competition in China from local makers like BYD and Geely.
The 10-brand group – which also owns Audi, Porsche and Skoda – said it was also struggling with falling demand in Europe and increased labor and production costs.
-Production moves-
“There will be no plant closures,” Thorsten Gröger, a negotiator for the IG Metall union, told a news conference.
However, under the agreement, production at Volkswagen’s smallest factory in Dresden will cease at the end of 2025.
The unions said an “alternative overall concept” would be found for the site, which employs about 300 people, with Volkswagen’s continued involvement.
At VW’s plant in Osnabruck, where about 2,300 people work, production will continue until mid-2027 before “other uses” are found for the site, the carmaker said.
Meanwhile, Volkswagen said it would move production of its popular Golf model from its flagship site in Wolfsburg, Germany, to a factory in Mexico.
In total, the carmaker has “reduced the technical capacity of more than 700,000 vehicles at German sites”, Thomas Schaefer, CEO of the VW brand, said at a news conference in Berlin.
The agreement with unions is “bringing growth and labor costs down to competitive levels,” Schaefer said.
“These are difficult decisions, but also important decisions for the future”.
Volkswagen said that of the planned four billion euro savings, 1.5 billion euros would come from lower labor costs and a progressive reduction in the group’s workforce.
The deal foresees a pay freeze for employees in 2025 and 2026 and a spread of previously agreed bonuses over several years.
– German conflict –
Volkswagen’s precarious financial position was highlighted when it reported a 64 percent drop in third-quarter profits to 1.58 billion euros in October.
The struggle at Volkswagen is symptomatic of broader malaise in Europe’s largest economy, which is hit by high energy prices and headed for a second consecutive year of contraction.
The risk that the crisis at one of Germany’s most prestigious companies could lead to mass layoffs has drawn politicians into the debate ahead of early elections on February 23.
The state government of Berlin and Lower Saxony, which holds 20 percent of the voting shares in Volkswagen, have relied on the group to find a solution.
Chancellor Olaf Scholz of the Social Democrats, who faces an uphill battle to keep his job in the elections, recently warned that closing factories “would not be the right approach”.
“Really because poor management decisions have contributed to the situation, this will not be a fix,” said Scholz, whose party is trailing in the polls behind the conservative opposition.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
