Volkswagen announced on Friday (December 20) that after several days of seemingly deadlocked negotiations, they have reached an agreement with the labor union IG Metall to prevent the closure of their factories in Germany.
Following 70 hours of grueling negotiations, Volkswagen and the union came to a resolution. The agreement has been hailed by union leaders as a “Christmas miracle,” marking the longest negotiation in Volkswagen’s 87-year history.
The Volkswagen Works Council stated on Friday that Volkswagen has agreed to keep all 10 German factories operational and to reinstate job security agreements until 2030. In exchange, workers have agreed to forgo certain bonuses, reduce production capacity at five factories by tens of thousands of vehicles, and reduce the workforce by over 35,000 employees over the next five years.
Since September, Volkswagen has been in talks with union representatives to discuss necessary measures to address challenges such as low-cost competition from Chinese rivals, sluggish demand in the European market, and slower-than-expected adoption of electric vehicles.
Volkswagen Group’s CEO Oliver Blume, in a statement, said, “After long and tense negotiations, this agreement signifies an important signal for the future viability of the Volkswagen brand.”
The company stated that the deal will save €15 billion annually in the mid-term and is not expected to significantly impact its 2024 guidance. Volkswagen is exploring alternative solutions for the Dresden and Osnabrueck factories, with some production being relocated to Mexico. The 5% wage increase agreed upon in November will be suspended, and car production at the Dresden factory will cease by the end of 2025.
Over the past month, approximately 100,000 workers have held two separate strikes, the largest in Volkswagen’s 87-year history, protesting wage cuts, production cuts, and the potential closure of German factories.
Daniela Cavallo, the chairperson of the Volkswagen Works Council, stated on Friday, “No factory will be closed, no staff will be laid off for operational reasons, and our company’s wage agreements will be safeguarded in the long term.”
Volkswagen’s crisis comes amidst political turmoil in Germany and broader upheavals faced by automobile manufacturers in the region.
Addressing the economic downturn in Germany has become a focal point for campaigning in the run-up to the early elections in February next year, with German Chancellor Olaf Scholz, who is trailing in polls, urging Volkswagen to keep all factories open.
Reacting to news of the agreement, Scholz said on Friday that Volkswagen and the union have reached a good, socially acceptable solution, which is good news.
“Despite significant difficulties, this ensures that Volkswagen and its employees can look forward to a brighter future,” he said.
The automotive giant employs approximately 120,000 workers in Germany.
(This article referenced a report by Reuters)