Volkswagen plans major restructuring: mass layoffs and factory closures loom

Germany's Volkswagen is on course to shut three factories and eye tens of thousands of layoffs as it digs deep into the recession over the next 20 years. Head of the company’s works council Daniela Cavallo told staff at the automaker’s largest plant in Wolfsburg on Monday.

Volkswagen, Europe's biggest carmaker, is in talks with unions on a far-reaching restructuring plan reducing costs and adjusting to a difficult economic picture. It would mark the first time German companies were considered when it came to plant closures, spurring fears about a blow to the nation’s industrial muscle.

This is not sabre rattling in the collective bargaining round, Cavallo said, stressing management’s intentions are serious. Specifically, she said restructuring plans could involve a large layoff; the workforce of 300,000 or so in Germany has not been mentioned yet on which plants are closing and who is being fired.

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The comments indicate a growing divide between Volkswagen's labor force and management, as the auto maker suffers rising energy and labor costs, intense competition from Asian automakers, falling sales in Europe and China, and dealing with the transition to electric vehicles.

The developments add to pressure on the German government to act to boost the buoyant economy, which is on course for a second straight year of contraction. As federal elections approach next year and political challenges mount for Chancellor Olaf Scholz’s coalition, it is actively seeking measures to stimulate growth.

Cavallo also confirmed plans to cut staff of some 8,000 at the Volkswagen brand through potential layoffs and factory closures, and to cut salaries within the group by at least 10 percent and freeze pay in 2025 and 2026. This holistic approach to the issues confronting Volkswagen speaks to the magnitude of the difficulties the company faces in a fast changing automotive environment.