In a bid to cut costs and streamline its spending in the face of rising competition from Chinese carmakers, Volkswagen is mulling the closure of factories in Germany for the first time in its history.
In a memo to staff issued yesterday, the German automaker said that it could not rule out plant closures in its domestic market or ending its employment security programme, which has been in place since 1994 and prevents job cuts until 2029. It said that all measures would be discussed with its works council, Reuters reports.
A review by the company’s board determined that brands under Volkswagen AG require a comprehensive restructuring.”In the current situation, even plant closures at vehicle production and component sites can no longer be ruled out,” the company stated in the note.
“The European automotive industry is in a very demanding and serious situation. The economic environment became even tougher, and new competitors are entering the European market. Germany in particular as a manufacturing location is falling further behind in terms of competitiveness,” said Volkswagen Group CEO Oliver Blume.
The Volkswagen brand, which provides most of the automaker’s total sales, is reportedly the first of the group’s brands to undergo a cost-cutting drive, which is targeting €10 billion (RM48 billion) in savings by 2026 as it attempts to streamline spending to survive the transition to electric vehicles.
The company’s works council vowed it would put up fierce resistance to the executive board’s plans. It added that the automaker considers one large vehicle plant and one component factory in Germany to be obsolete. Analysts have in the past named the company’s production sites in Osnabrueck, in Lower Saxony and Dresden, in Saxony, as potential targets for closure.
Works council chief Daniella Cavallo said in an interview on Volkswagen’s intranet that the company’s management had made “many wrong decisions” in recent years, including not investing in hybrids or being faster at developing affordable battery-electric vehicles. Cavallo said that Instead of plant closures, the board should be reducing complexity and taking advantage of synergies across its group.
Meanwhile, the IG Metall union called the announcement an irresponsible decision that “shakes the foundation” of Volkswagen, the country’s largest industrial employer and Europe’s top carmaker by revenue. It has not closed a plant since 1998, when it shut down a US facility in Westmoreland, Pennslyvania.
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How the tides have turned first they went into China thinking they can milk their car for good and now its the other way round.
This is expected as the minimum starting salary at VW plants is 5k euros.