Volkswagen Makes Major Cuts to German Operations to Avert Strike
HANOVER (Reuters) – Volkswagen has announced sweeping changes to its German operations, including over 35,000 future job cuts and sharp capacity reductions, in a deal to avert mass strikes with unions. The agreement, hailed as a “Christmas miracle” by union leaders, followed 70 hours of grueling negotiations, the longest in the company’s 87-year history.
Under the deal, there will be no immediate site closures or layoffs, and Volkswagen has backed away from demanding 10% wage cuts. The agreement could also provide relief to investors, with shares rising 2.4% in extended trade. Volkswagen has been in talks with union representatives since September over measures to address declining demand in Europe and lackluster adoption of electric vehicles, as well as increasing competition from cheaper Chinese rivals.
The deal is expected to save the company 15 billion euros annually in the medium term and has no significant impact on its 2024 guidance. While there are no immediate plans for site closures, Volkswagen is exploring options for its Dresden plant and is considering repurposing the Osnabrueck site, including looking for a buyer. Production at the Dresden plant is set to cease by the end of 2025.
Under the agreement, VW AG’s staff will not receive raises under a collective wage agreement over the next four years, while some bonuses will be scrapped or reduced. Production at VW’s Wolfsburg plant, its largest, will be cut to two assembly lines from four.
The deal marks a significant change for Volkswagen, which has been under pressure to reduce costs and restructure its operations. The company’s decision to cut 35,000 jobs represents around a quarter of its workforce, but will not involve compulsory redundancies and will be done in a socially responsible manner. The agreement may also help to address overcapacity at the company’s German plants, which will be reduced by more than 700,000 vehicles.
