Volkswagen, the world’s largest automaker, has announced a plan to close at least three of its German factories in a bold cost-cutting effort, responding to rising competition, declining demand, and the costly shift to electric vehicles.
Withheld Specifics on Job Cuts
Alongside these closures, the company will reduce wages by 10% at its remaining German plants, according to Daniela Cavallo, head of Volkswagen’s Works Council.
Cavallo emphasized the seriousness of the decision, explaining that it aims to “adjust the structure of Germany’s largest industrial group.”
Volkswagen’s management has withheld specifics on job cuts for now, though Cavallo’s statement implies substantial impacts across the workforce, according to El Economista.
Union representatives and company leadership are set to meet Wednesday to begin negotiations.
Closes Multiple Plants
Initially, Volkswagen hinted at a single plant closure in early September, marking its first shutdown in Germany in 87 years.
Now, however, the company’s decision to close multiple plants highlights the intensifying challenges faced by German automakers.
The nation’s auto industry is struggling with lower demand, rising production costs, and aggressive competition from affordable Chinese electric vehicles.
Broader economic difficulties are compounding these issues, with the Bundesbank forecasting a recession in 2024, marking the second consecutive year of contraction for Germany’s industrial economy.
Volkswagen has responded by lowering its financial outlook for 2023, projecting around $320 billion in sales and $18 billion in operating income.
Stock prices have fallen 18% this year, with shares dipping another 0.2% following the news. Financial analysts at Jefferies estimate that Volkswagen may need to set aside €4 billion (about $4.25 billion) to cover anticipated layoffs, potentially impacting up to 15,000 employees.
