Volkswagen Plan Mass Layoffs

Volkswagen are reportedly looking to significantly reduce their workforce in Germany and shut down at least three factories in the country, amid a major overhaul aimed at lowering costs and increasing return on sales, the head of the carmaker’s Works Council has announced.

Daniela Cavallo (right) explained to employees in Wolfsburg in the German state of Lower Saxony, on Monday that Volkswagen management are “absolutely serious” about the plans and that the move is “not saber-rattling in the collective bargaining round”, Reuters reported. 

 

Throughout their almost 90-year history, the company have never closed a plant in their home country. The last time they shut down any of their facilities was in 1988 in the US. 

 

“It is a firm intention to let the locations’ regions bleed dry and the clear intention to send tens of thousands of Volkswagen employees into mass unemployment”, Cavallo asserted. Her comments come as the automotive giant have been negotiating for weeks with unions over plans to overhaul their business in order to remain competitive in light of weaker demand from China and Europe. 

 

She did not specify which of the ten Volkswagen plants operating in Germany would be shut down or exactly how many of their roughly 300,000 workers in the country would be laid off, but noted that all remaining facilities would be affected by the changes and that “none of them are safe”. Cavallo also stated that Volkswagen management are demanding a 10% pay cut and no pay raises for the next two years. 

 

She stressed, however, that the German government must urgently come up with a plan to ensure that the country’s economy does not “go down the drain”. She noted that Volkswagen and other car companies are in agreement as to the nature of the problems they are facing, such as slower-than-expected electric transition as well as fierce competition from Chinese automotive brands entering Europe. 

 

“We are not far apart when it comes to analyzing the problems. But we are miles apart on the answers to them”, Cavallo said. 

 

I'm not surprised at Volkswagen's calamitous circumstance because on Wednesday, the company reported a 42% plunge in third-quarter profit to their lowest level in three years. 

 

Earlier this month, the Sueddeutsche Zeitung newspaper reported that the German economy is expected to contract for a second year in a row as it struggles to keep up with soaring energy costs after cutting itself off from Russian gas. [FYI, Germany's economy contracted by 0.3% in 2023, and the government predict a further contraction of 0.2% in 2024]. 

 

Over the past year, the German government have noted a 5.3% drop in the country’s industrial output as orders for domestic-made goods have also plummeted. 

 

Experts at the Berlin-based Forum for a New Economy have warned that Germany’s failures are expected to turn the 2020s into a “lost decade” for the country as it suffers “the worst economic downturn since World War II”.

Is Germany facing collapse? I won't be surprised if it does.