For the first time, Volkswagen said it’s possible that they may have to shut down some plants in Germany — its home country.
Due to headwinds that have been occurring in the auto industry, the company said it is also dropping a long-standing pledge it has made to protect jobs, a move that would have prevented the company from instituting layoffs through 2029.
On Monday, Volkswagen Group CEO Oliver Blume issued a statement that read:
“The European automotive industry is in a very demanding and serious situation.”
There’s been a lot of new competition entering European markets, he said, which has deteriorated Germany’s position as a major location for manufacturing. It’s all forced the company to “act decisively, Blume said.
The automaker, which was founded back in 1937, has never closed one of its domestic factories in Germany, Bloomberg News reported this week. If it does eventually close a factory there, it would be the first time since the company shuttered any manufacturing plant at all.
That was last done in 1989 when the company closed a facility it had been running in Westmoreland, Pennsylvania.
The company has been undertaking efforts to reduce some costs, which have been “yielding results,” according to the CEO of the Volkswagen Passenger Cars division, Thomas Schaefer. That being said, the “headwinds have become significantly stronger.”
Automakers in Europe are now facing much more competition from inexpensive electric cars that are being produced in China. The half-year results for Volkswagen showed that it won’t achieve its original target of €10 billion in cost savings by 2026, according to the company.
The layoff and closure discussions that are happening revolve around the core Volkswagen brand, company officials have said. Operating earnings for the branch have dropped to €966 million this year, down from the €1.64 billion mark it had earlier in the year.
In addition to the main Volkswagen brand, the company also makes the luxury vehicles Porsche and Audi. Both of those brands have higher profit margins than the mass-market vehicles that the company makes, which also includes Skoda and SEAT.
Some of the cost-cutting measures the company has instituted have come in the form of forced layoffs through buyouts and early retirements. The company is now saying that those measures might not be enough.
The company employs roughly 120,000 people in Germany.
Representatives for workers and unions heavily criticized the idea of more layoffs or closing the plants.
Thorsten Groeger, the chief negotiator with Volkswagen for the IG Metall industrial union, posted on the union’s website:
“[Management’s approach is] not only shortsighted, but dangerous, as it risks destroying the heart of Volkswagen.”
Daniela Cavalla, a top employee representative, also said:
“Management has failed. … The consequence is an attack on our employees, our locations and our labor agreements. There will be no plant closings with us.”
In July, the EU moved to impose what would be provisional tariffs on EVs from China. Those levies would only be collected, though, if the EU isn’t able to come to a trade agreement with China.
