Historic moment for Volkswagen: Automaker plans to close ‘at least' 3 German plants and cut thousands of jobs

Volkswagen is planning significant restructuring efforts, which include closing at least three factories in Germany and laying off thousands of employees. These measures are part of broader plans to downsize its operations within the country and reflect the considerable challenges the company is facing as Germany's largest manufacturer. The company is currently in discussions with labor unions regarding these cost-cutting measures, with potential strikes looming as tensions rise.

Volkswagen currently employs about 295,000 people in Germany. The planned factory closures would be unprecedented in the company's 87-year history and showcase the urgency of Volkswagen's need to manage costs amid fierce competition, particularly from China, alongside slower sales in Europe. The automaker is selling significantly fewer cars in Europe compared to pre-pandemic levels, translating to the output of approximately two car plants less annually.

The works council, which represents Volkswagen's employees and has substantial board influence, revealed that the proposed cuts, including a 10% pay reduction for all workers, are far more extensive than previously anticipated. These proposals have been described as 'historic' in magnitude, and no German VW plants are immune from these changes. Some production is expected to move abroad or be outsourced. These adjustments are deemed necessary to maintain competitiveness and enable future investments essential for the company's growth.

Volkswagen's German factories have been highlighted as underperforming, with costs surpassing budget estimations by as much as 50%, resulting in substantially higher expenses compared to competitors. Internal processes, which rival firms have moved outside more efficiently, contribute to the high cost structure. The company is preparing to present new proposals for reducing labor costs in upcoming discussions with unions. There is also an intention to terminate a long-standing employment protection agreement to help secure sustainability for the business's future.