Volkswagen plans to shut down 3 factories in Germany amid massive layoffs

BERLIN

Automaker Volkswagen said on Monday that it plans to shut at least three factories in Germany while downsizing the remaining production plants in the country.

“Management is absolutely serious about all this,” said Daniela Cavallo, chairwoman of the Volkswagen local Works Council and Volkswagen Group. “This is not saber-rattling in the collective bargaining round.”

The German government urgently needs to come up with a plan to stop the decline in the German auto industry, she added.

Cavallo gave no information about which German production plants would be affected by closures or how many of the group’s employees in Germany, numbering some 300,000, would face layoffs.

Volkswagen announced factory closures in Germany in September as a part of the company’s cost-cutting measures, in a first in its history, while ending its 30-year-old employment protection plan five years early.

High energy and labor costs in Europe, resulting in reduced competitiveness and declining sales, were cited as main drives for these closures.

The decision shook the German auto industry, and Volkswagen had been negotiating with unions for weeks over restructuring and cost-cutting plans, but the automaker was warned by German union leaders not to make “a historic mistake” by laying off its workers.

The Volkswagen Group employs around 650,000 people at some 114 production facilities in Europe, Asia, Africa, and the Americas.

The company was planning to reduce personnel expenses by a fifth by 2026 as a part of the savings and cost-cutting measure program of €10 billion ($10.8 billion).

Inflationary pressures, high energy costs, slow economic growth in Europe, the rise of the far-right, and competition by China and Tesla plagued German carmakers, as they were put under severe pressure to cut costs to remain competitive while demand was low.

Meanwhile, the transition from combustion engine cars to electric vehicles still pose a challenge for Germany’s automotive sector due to regulations in the country and in the EU. While investing in battery technology, the industry also has to deal with rising costs.

*Writing by Emir Yildirim in Istanbul