Volkswagen Weighs Historic Factory Closures in Germany Amid Cost-Cutting Drive

Volkswagen Group is considering the unprecedented move of closing its factories in Germany as part of an aggressive cost-cutting initiative.

According to a statement released on Monday, the potential closures would affect not only Volkswagen's main passenger car brand but also other entities within the group. The company is weighing the closure of at least one major auto manufacturing plant as well as a component factory in Germany. Additionally, Volkswagen plans to terminate an employment agreement with unions which currently guarantees job security until 2029.

The automaker's passenger car brand has been grappling with low profit margins for an extended period, making cost-cutting efforts more challenging amid a transition to electric vehicles and a slowdown in consumer spending. Volkswagen CEO Oliver Blume stated, "The macroeconomic environment has become more challenging, and new competitors are entering Europe, putting Germany at a competitive disadvantage."

Volkswagen employs around 650,000 people worldwide, with nearly 300,000 based in Germany. The company’s supervisory board, which includes a significant representation from labor unions, further complicates the execution of such measures. The state of Lower Saxony, which holds a 20% stake in Volkswagen, typically aligns with labor unions.

If enacted, the closures would mark the first time in the company’s 87-year history that a Volkswagen factory in Germany has been shut down. This move is likely to incite significant conflict with Germany's powerful labor unions.

Historically, disputes with labor unions have led to the downfall of several previous CEOs, including Bernd Pischetsrieder, Wolfgang Bernhard, and Herbert Diess. All three attempted to enhance Volkswagen's operational efficiency in Germany.

The proposed shutdowns underscore the mounting pressures Volkswagen faces in staying competitive in the global auto market while balancing labor relations and cost management.