Volkswagen is to reduce its workforce in Germany by 35,000 as part of a far-reaching deal to revive the automotive giant.
After 70 hours of talks with unions, the longest in the company’s history, VW struck a redundancy deal reduced from an original demand for 55,000 job losses. Unions said they were happy with the deal, saying the targets could be met through retirements and voluntary redundancies.
In return employees will forgo bonuses and looming salary increases. For Thorsten Gröger, chief negotiator for the IG Metall union, the final package “includes painful contributions from employees, but at the same time creates prospects for the workforce”.
VW brand chief Thomas Schäfer described the breakthrough as a “good agreement” that satisfied the company’s priorities to reduce over-capacity while cutting both development and production costs to a more competitive level.
“These are difficult but important directional decisions for the future,” he said, decisions which would secure VW’s future as a mass market car maker in its homeland.
As well as the job reductions German unions and VW executives have agreed to reduce total capacity at German factories by 734,000 cars annually – nearly equivalent to the annual production of VW’s main plant in Wolfsburg.
After four fruitless rounds of talks, the fifth and final round saw the breakthrough late on Friday. VW works council chief Daniela Cavallo described the deal as “rock solid” for avoiding mandatory redundancies and across-the-board wage cuts as demanded originally by management.
In September VW chief executive Oliver Blume warned the firm’s future in Germany was in doubt given huge overcapacity in domestic plants and production costs “often twice as high as the average of our European locations”.
As well as a 10 per cent wage cut the company set aside €900 million in its accounts for likely redundancy payouts.
Union leaders blamed management for the company’s difficulties. Failure to implement workable reform proposals had, they argued, seen VW fall behind in the transition to electric vehicles.
Like other European car companies VW is struggling in a shrinking European market. While one in four new vehicles sold in Germany come from the wider VW stable (including Audi and Porsche), sales as a whole are down two million annually since 2019.
Competition from Asian competitors has seen the market share of Volkswagen’s core brands – Volkswagen, Skoda and Seat – drop to just 11 per cent in Europe. VW’s Chinese market, long a reliable cash cow, is declining, adding pressure for restructuring.
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