The white and blue VW logo stands out on the roof of the brand tower at the VW factory campus in Wolfsburg.
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German auto giant Volkswagen is preparing for a confrontation with unions soon after the announcement. cannot be ruled out closed factories in its country for the first time in its nearly 90-year history.
Volkswagen management is expected to present the plan to around 18,000 workers at a town meeting in Wolfsburg on Wednesday morning, amid speculation that the carmaker could push ahead with the closure of plants in Osnabrueck in Lower Saxony and Dresden in Saxony.
A Volkswagen spokesperson did not immediately respond when contacted by CNBC on Tuesday.
In a move that underscores the challenges facing Europe’s top carmakers, Volkswagen warned on Monday that it could no longer rule out closing factories in Germany.
The Wolfsburg-headquartered company also said it felt compelled to end its job protection agreement – a job guarantee scheme that has been in place since 1994 – to ensure “urgently necessary structural adjustments to increase competitiveness in the short term”.
The logo of German carmaker Volkswagen (VW) is seen on the front of the Volkswagen ID. Buzz Pro electric van at the International Motor Show (IAA) in Munich, southern Germany, on September 5, 2023.
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Volkswagen Group CEO Oliver Blume said in a written statement on Monday that the automaker would need to “act decisively” to secure the company’s future.
“The European auto industry is in a very difficult and serious situation,” said Blume.
“The economic environment is becoming more difficult and new competitors are entering the European market. In addition, Germany in particular as a manufacturing location is falling further behind in terms of competitiveness,” he added.
Volkswagen said any necessary measures would be discussed with the General Workers Council — an elected group of employees representing the interests of the company’s workforce — and with Germany’s leading industrial union IG Metall. Both groups, which have significant influence at the company, have been sharply critical of the proposals.
Daniela Cavallo of the Volkswagen Works Council said the group would “vigorously oppose” potential plant closures, while a spokesperson for IG Metall described the plans as “shaking Volkswagen’s foundations and posing a major threat to jobs and locations”.
‘A central pillar for growth’
Volkswagen shares fell 0.5% at around 12:50 p.m. London time on Tuesday, paring gains from the previous session. Volkswagen’s share price has fallen more than 33% over the past five years.
The downturn comes amid a difficult economic environment for the automaker and the rise of new rivals in Europe, as Volkswagen struggles to survive. switch to electric cars.
“The situation is extremely tense and cannot be resolved through simple cost-cutting measures,” VW brand CEO Thomas Schäfer said on Monday.
“This is why we want to start discussions with employee representatives as soon as possible to explore the possibilities of restructuring the brand in a sustainable way,” he added.
Volkswagen stock over the past five years.
Volkswagen’s plans to consider unprecedented plant closures in Germany come at a politically tense time for Europe’s largest economy. Under Chancellor Olaf Scholz, the three-party coalition that governs in Berlin has deal a heavy blow in regional voting this weekend.
“The German automotive industry stands for globally successful products and innovations. It is a key pillar for growth and prosperity in Germany,” a German government spokesperson told CNBC via email, without commenting specifically on the measures Volkswagen has planned.
“At the same time, the company is currently in a challenging transition period to electric mobility. This also requires adjusting traditional structures and measures to increase competitiveness,” the spokesperson added, according to a Google translation.
“Close social partnership is a hallmark of the German automotive industry. The Federal Government therefore calls on the relevant social partners to continue to fulfil this responsibility in the future.”
Thomas Besson, head of automotive research at Kepler Cheuvreux, said the problems at Volkswagen reflected “a story across the industry”.
“We are seeing a big fragmentation story in the global automotive landscape,” Besson told CNBC’s “Street Signs Europe” on Tuesday.
“This situation… is also specific to Volkswagen, in the sense that they have given some guarantees to workers,” he added.
— CNBC’s Annette Weisbach contributed to this report.
