04/09/2024 – 8:08
Germany’s Volkswagen says it cannot rule out closing plants in its home country and will have to abandon a job protection pledge in place since 1994 that would have prevented layoffs until 2029.
“The European automotive industry is in a very serious situation,” Volkswagen Group CEO Oliver Blume said in a statement Monday. He cited new competitors entering European markets, Germany’s less competitive position as a home for carmakers and the need to “act decisively” to keep the business healthy.
Thomas Schaefer, CEO of Volkswagen’s passenger car division, said cost-cutting measures were “paying off” but that “the headwinds have become significantly stronger.”
Competition
European automakers are facing growing competition from low-cost Chinese electric cars. Half-year results indicate Volkswagen will miss its target of saving 10 billion euros ($12.7 billion) in costs by 2026, the company said.
The discussion about plant closures and layoffs concerns the company’s flagship brand, Volkswagen, which saw its operating profits fall to €966 million ($6 billion) from €1.64 billion ($10.2 billion) in the same period a year earlier.
The group also includes luxury brands Audi and Porsche, which have higher profit margins than Volkswagen’s mass-market vehicles, as well as SEAT and Skoda. The company has tried to cut costs through early retirements and voluntary severance programs that avoid forced layoffs, but now says those measures may not be enough.
Additional initiatives affecting factories or job guarantees would be negotiated with workers’ representatives. The plant closure would be the first since its U.S. plant in Westmoreland, Pennsylvania, was shut in 1988, according to German news agency Dpa.
Criticism
Union representatives criticized the idea. The move “is not only short-sighted, but dangerous, as it risks destroying the heart of Volkswagen,” Thorsten Groeger, chief negotiator with VW for the IG Metall industrial union, said on the union’s website.
The main employee representative, Daniela Cavallo, said that “management has failed.” “The consequence is an attack on our employees, our locations and our labor agreements. There will be no plant closures with us.”
Lower Saxony’s governor, Stephan Weil, who sits on VW’s board of directors, agreed that the company needed to take action but urged it to avoid closing any plants. “The state government will pay particular attention to this,” he said.
The information is from the newspaper The State of S. Paulo.
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