“It’s a very serious situation”: Volkswagen could close plants in Germany for the first time in history
London (CNN) –– Volkswagen is considering closing factories in Germany for the first time in its 87-year history as it deepens cost cuts amid growing competition from Chinese electric vehicle makers.
In a statement on Monday, the German carmaker, one of the world’s largest, said it did not rule out closing plants in its home country. Other measures to “protect the company in the future” include seeking to end a job protection agreement with unions, which has been in place since 1994.
“The European automotive industry is in a very demanding and serious situation,” said Oliver Blume, President and CEO of the Volkswagen Group. “The economic environment has become even more difficult and new competitors are entering the European market. Germany in particular, as a manufacturing location, is falling further and further behind in terms of competitiveness.”
Volkswagen, which embarked on a 10 billion euro ($11.1 billion) cost-cutting plan late last year, is losing market share in China, its largest market. Deliveries to customers there fell 7% in the first half of the year compared with the same period in 2023. Group operating profit plunged 11.4% to 10.1 billion euros ($11.2 billion).
The lackluster performance in China comes as the company loses ground to local EV brands, especially BYD, which also pose an increasing threat to its business in Europe.
“Our main area of action is cost reduction,” Blume told analysts on an earnings call last month, citing planned reductions in factory, supply chain and labor expenses. “We have taken all the necessary organizational measures. And now it’s about costs, costs and more costs.”
Volkswagen’s cost-cutting plans will face stiff resistance from employee representatives, who hold nearly half the seats on the company’s supervisory board, the body that appoints chief executives.
IG Metall, one of Germany’s most powerful unions, blamed mismanagement for the company’s shortcomings on Monday and vowed to fight to protect jobs.
“Today, the board of directors presented an irresponsible plan that shakes the very foundations of Volkswagen, massively threatening jobs and locations,” IG Metall chief negotiator Thorsten Groeger said in a statement.
“This approach is not only reckless, but also very dangerous: it risks destroying the heart of Volkswagen (…) We will not tolerate plans that the company makes at the expense of workers.”
Volkswagen employs almost 683,000 workers worldwide, including some 295,000 in Germany, according to its latest report.
Volkswagen Passenger Cars CEO Thomas Schaefer said the company remained committed to Germany “as the home of its business.” He added that VW would urgently begin talks with employee representatives to explore the possibilities of “sustainably restructuring the brand.”
“The situation is extremely tense and cannot be resolved with simple cost-cutting measures,” Volkswagen said.
