Cars stand at a Volkswagen dealership in Berlin, Germany, October 10, 2024.
Sean Gallup | Getty Images News | getty images
Volkswagen The company’s works council said on Monday it was considering widespread pay cuts and layoffs, as well as closing or downsizing its plants in Germany.
Volkswagen management recently submitted a plan to the council to cut wages by 10% and freeze wages for 2025 and 2026, according to works council chairwoman Daniela Cavallo. Putting all this together, it is estimated that workers will suffer a pay cut of approximately 18% during this period.
Workers with certain collective pay agreements will also lose bonuses and extra pay on their anniversary of employment, the works council, a group of elected employees representing the interests of the company’s employees, said.
Volkswagen also plans to close three plants in Germany and reduce the size of all other plants, Cavallo said.
Employees of German car manufacturer Volkswagen (VW) attend an information event by worker representatives focused on management’s latest savings proposals at the company’s headquarters in Wolfsburg, northern Germany, on October 28, 2024.
Julian Strattenschulte | Afp | getty images
“Specifically, this means bringing in significantly more products, volumes, shifts and entire assembly lines than we already did,” she said in a statement released Monday. “All Volkswagen plants in Germany are affected by this. None of them are safe,” Cavallo added.
She warned that sweeping job cuts were part of the automaker’s plans, noting tens of thousands of jobs were at risk.
The committee also found that Volkswagen plans to outsource some departments to outside companies or overseas automakers.
Volkswagen’s concerns
Volkswagen management submitted the plan to the works council separately from ongoing discussions on the labor agreement, the council said. The next round of talks will take place this Wednesday, when Volkswagen is scheduled to release its latest quarterly results.
In a statement translated by CNBC on Monday, Volkswagen said the overhaul was necessary due to economic conditions.
“Volkswagen will not be able to afford further investment unless we take significant steps to regain competitiveness,” said Gunnar Kilian, Volkswagen’s head of human resources. “Restructuring will ensure the company is financially sound in the future.” He said.
Thomas Schäfer, CEO of Volkswagen Passenger Cars, said car sales were not generating enough revenue for the business and energy, material and labor costs had increased. He added that the German plants are not productive enough and are more expensive compared to Volkswagen’s goals and the costs of its competitors.
Volkswagen also said on Monday that it would propose labor cost cuts in labor negotiations later this week.
Volkswagen shares closed down 0.46% on Monday.
Volkswagen, along with many other German and European automakers, is struggling amid the transition to electric vehicles and a broader global economic easing. Last month, the company cut its full-year outlook for the second time in less than three months, citing weaker-than-expected performance in its passenger vehicle segment.
Last September, the automaker warned of potential plant closures and said it would tear up numerous labor contracts. This includes arrangements with employees in specialist or leadership positions, temporary employees and apprentices.
The company also said it would end an employment protection agreement that had been in place for its German workforce since 1994.
The announcement was met with strong resistance from works councils and Germany’s top union, IG Metall.
On Monday, Thorsten Gröger, chief negotiator at IG Metall, said Volkswagen’s latest plans were unacceptable and “a stab at the heart of hard-working Volkswagen employees.”
“If Volkswagen confirms its dystopian path on Wednesday, the board should expect a corresponding result from us,” he said, according to a CNBC translation.
