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The future of Volkswagen in Germany is uncertain as the carmaker considers the possibility of closing plants in the country for the first time in its history. The move comes as Volkswagen faces increased competition from Chinese electric car manufacturers and struggles to stay profitable in a challenging market.
Volkswagen’s CEO, Oliver Blume, expressed concern about the European automotive industry, stating that new competitors and economic challenges are putting pressure on German industrial competitiveness. In an effort to “future-proof” the company, Volkswagen may consider dissolving a key labor union employment protection pact from 1994.
The company has already taken significant steps to reduce costs, cutting €10 billion ($11.1 billion) late last year. However, with market share declining in China, Volkswagen is facing a challenging road ahead. Deliveries to China have dropped by 7% from 2023, and group operating profit fell by 11.4% to €10.1 billion ($11.2 billion).
Competition from local electric vehicle companies in China, such as BYD, has further complicated Volkswagen’s situation. The company’s poor performance in China has had a direct impact on its European operations, leading to the need for drastic cost-cutting measures.
Volkswagen’s CEO has underscored the importance of cost-cutting in order to address the challenges facing the company. He emphasized that the focus is on reducing costs related to plants, the supply chain, and personnel. While organizational steps have already been taken, Volkswagen now faces the difficult task of implementing cost-cutting measures to ensure the company’s long-term viability.
Labor unions, which hold significant influence in Volkswagen’s supervisory board, have expressed opposition to the cost-cutting measures. IG Metall, one of Germany’s largest unions, has criticized Volkswagen’s management and vowed to protect jobs within the company.
The tension between management and labor unions highlights the complex nature of Volkswagen’s current situation. With over 683,000 employees worldwide, including 295,000 in Germany, the company’s decisions regarding plant closures and cost-cutting measures have far-reaching implications.
Volkswagen’s passenger vehicle CEO, Thomas Schaefer, has affirmed the company’s commitment to Germany as a business location. He has pledged to engage with staff representatives to discuss sustainable restructuring of the brand in order to address the challenges facing Volkswagen.
As Volkswagen grapples with the possibility of closing plants in Germany for the first time, the company faces a critical crossroads. The decisions made in the coming months will play a significant role in determining the future of Volkswagen and its operations in Germany and beyond. By addressing the challenges head-on and working collaboratively with stakeholders, Volkswagen hopes to navigate through this difficult period and emerge stronger on the other side.
