Volkswagen said on Thursday that it would go forward with the most sweeping restructuring in its 89-year history, cutting about 50,000 additional jobs in the face of surging Chinese competition, high energy prices and a costly transition to electric vehicles.
“This is a strong signal for the future of the Volkswagen Group,” Oliver Blume, the German automotive giant’s chief executive, said in a statement.
The decision, announced after a meeting of Volkswagen’s supervisory board, followed a tense standoff with unions representing its work force, which numbers more than 650,000 worldwide. But labor leaders backed the plan on Thursday.
“In this crisis situation, we fought hard for good solutions,” Christiane Benner, an official with the IG Metall union, said in the statement. “The executive board now has the foundation to tackle the major tasks ahead.”
Since the end of 2024, Volkswagen had already agreed to reduce its work force by about 50,000 by the end of the decade. Agreements have been reached with 37,000 employees so far, the company said. The plan on Thursday would bring the total cuts to about 100,000.
Volkswagen, one of the world’s largest carmakers, is an icon of European industry and German manufacturing. It is now also an emblem of their challenges as China has risen as the world’s leading maker of autos and electric vehicles. The company’s business in China powered it for decades, but its Chinese sales have plummeted. All the while, a flood of cheap Chinese cars has hollowed out German factories.
The fate of four factories in Germany that have been targeted for possible closure remains unclear. But the company said it had far more manufacturing capacity than it needed. It added that “alternative uses for these plants are being assessed.”
The “reality” is that those four plants — in Emden, Hanover, Zwickau and Neckarsulm — don’t have a clear future beyond 2030, Mr. Blume said last month. “We cannot carry that disadvantage indefinitely,” he said.
There could be ways to avoid shutting factories, potentially by converting them for use by the defense industry as Germany ramps up spending to deter Russia’s military threat. At its Osnabrück site, for instance, Volkswagen is in talks with defense companies, Mr. Blume said last month.
Mr. Blume has said Volkswagen needs to rein in costs that are still about 30 percent higher than those of comparable companies.
“It’s blindingly obvious that they desperately need to cut costs,” said Matthias Schmidt, a European auto industry analyst in Germany.
Cheap imports from China are fueling calls to take tougher measures against Beijing to counter what businesses see as unfair competition. Spurred by government subsidies, Chinese carmakers began focusing on electric vehicles years ago, investments that have allowed them to capitalize on rising demand for such models. About one in five new vehicles sold in Europe is electric.
The plan is more like a cease-fire than a peace treaty between worker representatives and Volkswagen management, said Ferdinand Dudenhöffer, director of the Center Automotive Research in Bochum, Germany.
“The plan formulates many goals, but fewer concrete steps,” Mr. Dudenhöffer said.
Still, it is a break from Volkswagen’s recent feud with employees. Workers at Volkswagen, as is the case for the German carmakers Mercedes-Benz and BMW, hold half the 20 seats on the supervisory board. Shareholders also have 10 seats. At Volkswagen, however, there are additional complications. Two shareholder seats are held by the State of Lower Saxony, which owns 20 percent of the company’s voting stock. And the state, home to Volkswagen’s headquarters in Wolfsburg, almost always takes the side of workers.
On Thursday, Olaf Lies, minister-president of Lower Saxony, endorsed the turnaround plan.
“The challenges facing Volkswagen and the German automotive industry are enormous,” he said. The deal, he said, signals that Volkswagen is willing to make investments and find “long-term prospects” for factories.
For the company and industrial manufacturing in Germany more widely, the crisis is “existential,” said Harald Hendrikse, a managing director at Citi Research. He estimates that Volkswagen’s cost to make a car across Europe far exceeds the costs at the best sites in China.
The company aims to produce nine million cars a year, compared with a goal of 12 million before the Covid-19 pandemic and 10 million more recently. In July, Volkswagen said it would cut the number of models it offered by as much as half in a bid to reduce costs and take on Chinese competition.
Volkswagen, Mr. Schmidt said, can’t afford to wait.
“It’s almost getting to the point of whether VW can survive in their current form,” he said. “It’s now or never.”
- Credits: The New York Times
- Author: James Paton
- Photo: Agence France-Presse
