Volkswagen announced on Monday (September 2) that it is considering the historic closure of two factories in Germany. This move indicates that the European automotive giant is facing increasing price pressures from Asian competitors. It also marks the first time in its 87-year history that Volkswagen is considering closing factories in Germany.
Volkswagen CEO Oliver Blume stated in a press release, “The European automotive industry is facing very difficult and challenging circumstances. The economic environment has become more severe, with new competitors entering Europe.”
“In addition, Germany’s competitiveness as a manufacturing hub is further falling behind. In this environment, the company must now take decisive action,” Blume said.
On Monday, Volkswagen informed the labor council representing employees that it is considering closing at least one larger automobile manufacturing plant and a component factory in Germany to save costs.
However, the labor council has vowed to “strongly resist” the board’s plan.
Volkswagen’s CFO Arno Antlitz will speak to employees alongside Thomas Schaefer, head of the Volkswagen brand, at a labor council meeting on Wednesday morning.
Daniela Cavallo, chair of the company’s labor council, a powerful member of the IG Metall union, expressed hope that Volkswagen CEO Blume would also participate in negotiations, adding that Wednesday’s meeting will make the Volkswagen management “very uncomfortable.”
In addition to the plan to close factories in Germany, Volkswagen, which employs around 680,000 workers, stated that potential measures also include attempting to terminate the job security plan signed with the union. The program has been in place since 1994 and prevents Volkswagen from laying off employees before 2029.
If Volkswagen ultimately decides to close its factories in Germany, it will lead to conflicts with the powerful union. Volkswagen stated that all measures will be discussed with the labor council.
Volkswagen is facing increasing challenges in Europe, the United States, and notably China, where Chinese electric car manufacturers such as BYD are capturing market share. Over the past two years, Volkswagen’s stock losses have been greater than any major competitor. Volkswagen also controls brands like Audi, Porsche, SEAT, and Skoda. The company announced in July that it is considering closing the Audi factory in Belgium. This marks the first time the company has proposed closing a European factory and will be the first global closure in the group’s 40-year history.
Currently, automotive manufacturers in Europe and the United States are under increasing pressure, especially from cheap Chinese electric car manufacturers. In response to Chinese government subsidies for domestic companies, the EU and the US have announced measures to impose tariffs on imported Chinese electric vehicles.
(This article references reports from Reuters and The Guardian.)