By Axel Schmidt, Christoph Steitz and Christina Amann
WOLFSBURG, Germany (Reuters) – Volkswagen (ETR:) plans to close a minimum of three factories in Germany, lay off tens of hundreds of employees and shrink its remaining vegetation in Europe’s greatest economic system because it plots a deeper-than-expected overhaul, the corporate’s works council head stated on Monday.
Europe’s greatest carmaker has been negotiating for weeks with unions over plans to revamp its enterprise and minimize prices, together with contemplating plant closures on dwelling soil for the primary time, in a blow to Germany’s industrial prowess.
Volkswagen reiterated on Monday that restructuring was wanted and stated it will make concrete proposals on Wednesday.
“Administration is totally critical about all this. This isn’t sabre-rattling within the collective bargaining spherical,” Daniela Cavallo, Volkswagen’s works council head, instructed staff on the carmaker’s greatest plant, in Wolfsburg, threatening to interrupt off talks.
“That is the plan of Germany’s largest industrial group to start out the sell-off in its dwelling nation of Germany,” Cavallo added, not specifying which vegetation could be affected or what number of of Volkswagen Group’s roughly 300,000 employees in Germany may very well be laid off.
Cavallo’s feedback mark a serious escalation of a battle between Volkswagen’s employees and the administration, as the corporate faces extreme stress from excessive vitality and labour prices, stiff Asian competitors, weakening demand in Europe and China and a slower-than-expected electrical transition.
In addition they heap additional stress on the German authorities to behave to revive the economic system, which appears set for a second successive 12 months of contraction with Chancellor Olaf Scholz’s coalition trying to find methods to spur development. Scholz trails within the polls with federal elections due subsequent 12 months.
Volkswagen additionally plans to chop salaries on the model by a minimum of 10% and freeze pay in each 2025 and 2026, Cavallo stated.
1000’s had gathered in Wolfsburg, the place the corporate has been headquartered for almost 9 many years. Blowing horns and whistles, employees insisted not a single plant ought to shut.
Volkswagen stated in an announcement that it will make proposals for how you can minimize labour prices on Wednesday, when employees and administration meet for the second spherical of wage talks and the carmaker releases third-quarter outcomes.
“The scenario is critical and the duty of the negotiating companions is gigantic … With out complete measures to regain competitiveness, we will be unable to afford important investments sooner or later,” Volkswagen Group board member Gunnar Kilian stated.
Thomas Schaefer, who heads the Volkswagen model division, stated German factories weren’t productive sufficient and have been working 25-50% above focused prices, which means some websites have been twice as costly in comparison with the competitors.
Volkswagen shares have been down greater than 1% after the announcement. Shares of peer Mercedes Benz (ETR:) additionally fell. VW shares have misplaced 44% of their worth over the previous 5 years, in contrast with a drop of 12% for Renault (EPA:) and a achieve of twenty-two% for Stellantis (NYSE:).
“The plans go far past market expectations,” stated Daniel Schwarz, an analyst at Stifel. “I consider this displays a singular mixture of unfavourable elements: competitors in China, softening of demand in Europe, particularly for BEVs (battery-powered electrical automobiles), stricter regulation.”
Unions have immense clout at VW, the place labour representatives maintain half the seats on the supervisory board and are, in principle, legally entitled to carry strikes from Dec. 1 as a software to additional escalate the battle.
Volkswagen’s scenario displays a broader development on the planet’s third-largest economic system, which is seeing its dominance challenged by extra nimble and cheaper rivals in key areas, together with within the auto trade, its industrial spine.
“If VW confirms its dystopian path on Wednesday, the board should count on the corresponding penalties on our half,” the IG Metall union’s negotiator Thorsten Groeger stated, vowing fierce resistance.
Strikes, which had been threatened for the beginning of December, have been now probably, Schwarz stated.
Cavallo stated Berlin wanted to urgently provide you with a masterplan for German trade to make sure it doesn’t “go down the drain”.
A authorities spokesperson stated Berlin was conscious of Volkswagen’s difficulties and remained in shut dialogue with the corporate and employee representatives.
“The Chancellor’s place on that is clear, nonetheless, particularly that attainable incorrect administration choices from the previous should not be to the detriment of staff. The goal now could be to take care of and safe jobs,” the spokesperson instructed an everyday briefing.
Scholz and his Finance Minister Christian Lindner are each internet hosting separate enterprise summits on Tuesday whereas Financial system Minister Robert Habeck final week floated a serious plan to stimulate funding.
Trade information suggests there can be no upturn for automakers, stated Moritz Kronenberger, a portfolio supervisor at Union Funding, which owns shares in Volkswagen.
“Vital cost-cutting measures should subsequently be taken promptly earlier than the continuing underutilisation of the vegetation results in damaging money flows.”
It follows extra unhealthy information for German carmakers final week, with each Mercedes-Benz (OTC:) and Porsche vowing to step up cost-cutting measures after posting revenue drops on a weakening Chinese language market.
German carmakers additionally worry being caught within the crosshairs of a commerce conflict between the European Union and China, with hefty EU tariffs on Chinese language electrical automobiles set to come back into drive this week.
“I consider that anybody who hasn’t but understood what it is all about ought to now actually get up,” stated Stefan Erhardt, an worker at one other Volkswagen plant close to the German metropolis of Kassel.
“That is actually about all our livelihoods for the longer term, concerning the suppliers. That is about each small baker right here at this location. I’ve to say, I am actually a bit scared.”
