VW warns of redundancies and plant closures in Germany

German car giant Volkswagen is warning staff that changes need to be made to future-proof the company. These could include redundancies and even the closure of manufacturing plants in the country, for the first time in VW's history.

Around 16,000 employees packed into a hall in Wolfsburg to listen to company managers' presentations, while another 5,000 or so gathered outside.

Bosses have sounded the alarm bell over the company's financial health and announced that jobs that were protected under a 1994 agreement with workers' representatives may not be so secure.

VW has said some of its German-based production may need to close, which has enraged staff. Daniela Cavallo, head of the VW Works Council, told reporters that closures of any kind in Germany will not be accepted.

"There is only one way forward for us which is that in the end, plant closures will be avoided," she insisted. "In our view, there can't be any other result and for that, like I said before, we will vehemently fight. Workers showed today that they are ready to go down that road with us."

The prospect of plant closures and scrapping job guarantees comes as VW searches for more ways to save money.  This is on top of an $11 billion cost-cutting effort, while the company aims to increase the profit margin to 6.5 percent by 2026. It stood at 2.3 percent for the first half of 2024.

Auto industry expert Stefan Brazil said that big changes are coming.

"We are indeed experiencing a turning point in the automotive industry," he warned. "The big party that this industry has been enjoying, and from which German manufacturers benefited for a long time, has ended."

Demise of the brands?

VW's largest market is China, but sales there for the first half of this year are down 7 percent compared to 2023. Chinese vehicle manufacturers, particularly BYD, have taken up that market share as consumers opt for less expensive domestically-made vehicles.

No one is seriously talking about the demise of one of Germany's most recognizable brands just yet. Volkswagen is having to make changes to adjust to the modern marketplace.

Uli Brückner, Jean Monnet Professor for European Studies at Stanford University in Berlin, says rumors of VW Group's death have been exaggerated.

"They made 23 billion [euro – around $25.5m] profit last year, so it's not the end of the world," said Brückner. "And when we look at the profits of the different brands within the Volkswagen holding, other performers like Audi and Skoda, and see that they do pretty well. Only the mothership is not doing well."

VW and the unions are due to start negotiations over wage rises in October. The council which represents workers are urging those talks to be brought forward. However, union leaders say that there will be no talks at all unless the prospect of shutting down plants is taken off the table.

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