Volkswagen warns of plant closures

Volkswagen said on Monday it can no longer rule out plant closures in Germany as it pursues ways to save several billion euros in a cost-cutting drive at its namesake brand.

The carmaker considers one large vehicle plant and one component factory in Germany to be obsolete, its works council said, vowing “fierce resistance” to the executive board’s plans.

Volkswagen said that it also felt forced to end its job security programme, which has been in place since 1994 and which prevents job cuts until 2029, adding all measures would be discussed with the works council.

“The situation is extremely tense and cannot be overcome by simple cost-cutting measures,” VW brand chief Thomas Schaefer said in a written statement.

The Volkswagen brand, which fuels most of the automaker’s unit sales, is the first of the group’s brands to undergo a cost-cutting drive targeting 10 billion euros ($11.07 billion) in savings by 2026 as it attempts to streamline spending to survive the transition to electric cars.

A difficult economic environment, new competitors in Europe, and the falling competitiveness of the German economy meant the carmaker needed to do more, Volkswagen Group Chief Executive Oliver Blume said in a statement to its management.

Volkswagen shares were up 2.57% as of 1325 GMT, after jumping about 1.5% directly after its announcement at 1300 GMT.

‘WRONG DECISIONS’

German union IG Metall called Volkswagen’s announcement an irresponsible decision that “shakes the foundation” of the company, which is Germany’s largest industrial employer and Europe’s top carmaker by revenue.

Works council chief Daniella Cavallo said in an interview on Volkswagen’s intranet that management had made “many wrong decisions” in recent years, including not investing in hybrids or being faster at developing affordable battery-electric cars.

Instead of plant closures, the board should be reducing complexity and taking advantage of synergies across the Volkswagen group’s plans, Cavallo argued, criticising the company’s “documentation madness” and “salami-slicing tactics”.

Chief Financial Officer Arno Antlitz will speak to staff alongside VW brand chief Thomas Schaefer at a works council meeting on Wednesday morning. Cavallo said she expects Chief Executive Oliver Blume to get involved in negotiations as well.