Volkswagen CEO Thomas Schaefer has announced that the automotive giant sees no alternative to layoffs and plant closures to achieve a cost reduction of €4bn ($4.16bn). This decision comes amidst conflict with the company’s unions, who have threatened strikes starting from December 2024.
The unions have been seeking solutions from the company in ongoing negotiations over pay and capacity that do not involve factory closures or significant job cuts. However, Schaefer emphasized the need for restructuring to reduce both overcapacity and costs, stating that delaying the process until 2035 would be detrimental to Volkswagen’s competitiveness.
Schaefer indicated that the majority of the proposed job reductions could occur through natural attrition and early retirement schemes. Despite these measures, he acknowledged that additional steps are necessary to address the company’s financial challenges.
The company has proposed a 10% wage reduction for workers at the VW AG unit, which is at the center of the dispute. Schaefer highlighted the challenging outlook for demand in Europe and pointed out that labor costs at Volkswagen’s German sites are significantly higher than those at competitors and VW’s locations in southern and eastern Europe.
Although ongoing savings efforts have positively impacted profits by about €7.5bn, Schaefer stressed the need for an additional €4bn in savings. He mentioned that plant closures in Germany, specifically in vehicle manufacturing facilities and component production sites, may be unavoidable.
In response to the company’s cost-saving measures, Volkswagen’s workers union proposed $1.6bn in savings, contingent on avoiding plant closures in Germany. Despite the ongoing negotiations and conflicts, Volkswagen is determined to implement the necessary restructuring within a period of three to four years to ensure its competitiveness in the automotive industry.
