VW plans factory closures and layoffs amid stiff competition from Asia

Volkswagen is preparing to shut at least three factories in Germany, lay off tens of thousands of workers and reduce its European manufacturing footprint, according to the head of the group's work council.

The chief labor representative at Europe's biggest automaker said talks with management had revealed the scale of the cuts coming, amid warnings that employees could soon strike in response to the plans.

"Management is absolutely serious about all this. This is not saber-rattling in the collective bargaining round," Daniela Cavallo, Volkswagen's works council head, told several hundreds of employees in Wolfsburg.

"This is the plan of Germany's largest industrial group to start the sell-off in its home country of Germany."

Cavallo did not specify which plants are slated for closure or how many of Volkswagen's roughly 300,000 staff would be affected, but the revelations underscore the scale of the difficulties at one of Germany's most well-known industrial conglomerates.

Strike warnings, more talks planned

In a statement, Volkswagen did not respond to the specifics on the work council head's claims, but said it planned to make proposals for how to cut costs on Wednesday during talks between employees and management.

"This is the only way to finance further investments in the future from our own resources," said the company, without giving specific details on its restructuring plan.

"The situation is serious and the responsibility of the negotiating partners is enormous," said Volkswagen Group board member Gunnar Kilian. "Without comprehensive measures to regain competitiveness, we will not be able to afford essential investments in the future."

"We are not earning enough money with our cars currently," said Volkswagen Brand CEO, Thomas Schaefer. "At the same time, our costs for energy, materials and personnel have continued to rise. This calculation cannot work in the long term.

"So we have to get to the root of the problem: we are not productive enough at our German sites and our factory costs are currently 25-50 percent higher than we had planned. This means that individual German plants are twice as expensive as the competition," he added.

Bumpy road for German auto companies

The news of Volkswagen preparing to shrink its footprint comes amid warnings over competition from Asia and increased production costs inside German factories. Mercedes-Benz and Porsche announced last week they would embark on cost-cutting measures after profit drops on weakening Chinese demand. The German government has said its priority is to save jobs.

"The Chancellor's position on this is clear, however, namely that possible wrong management decisions from the past must not be to the detriment of employees. The aim now is to maintain and secure jobs," the Federal Government spokesperson told a regular briefing.