Volkswagen on Friday Announced Sweeping Changes
Hanover – Volkswagen Group has announced a package deal to avoid mass strikes across its German operations, reducing production capacity, cutting hundreds of thousands of jobs and slashing costs.
The agreements come after 70 grueling hours of negotiations and would see more than 35,000 jobs removed over the next few years. The cuts would occur through a combination of voluntarily early retirements, reduction in working hours and outsourcing of certain jobs.
“This package of measures sets the company on a decisive path for its future in terms of costs, capacities, and structures,” said the company’s CEO Oliver Blume.
Under the agreed deal, there will be no immediate site closures and no layoffs for operational reasons. The company’s plants will continue to operate through 2025, following which the Dresden plant production will be shut down completely.
The agreement also froze wages for four years for Volkswagen AG staff, removed some bonuses, and converted some to fixed salaries to save costs. The site at Osnabruck will be repurposed, and production will likely shift to Mexico.
By cutting costs, Volkswagen anticipates saving around 15 billion euros annually in the medium term, which compares favorably to the investment of 1.15 billion euros required to reopen the Skoda plant halted last year.
The savings are expected to come after Volkswagen has finished investing $10 billion in electric powertrain production. The planned cost cuts have been estimated to save 10 times that amount, according to industry sources.
The CEO and union representatives hailed the deal as a “miracle” that will shield the company from the mass strikes and preserve jobs longer.
“This deal ensures, for the first time ever, that we have collectively agreed measures for the period from 2024 up to 2030” said Daniela Cavallo, the works council president.
The company’s current employees will have to contend with a wage freeze along with reduced bonuses. With no layoffs or site closure in the near future and no significant impact on annual guidance, Volkswagen has announced the deal a significant shift for the company.
Many workers and experts believe a comprehensive plan should be a step forward to address further market stagnation and increase efficiency.
“The unions in Germany are generally quite active and will be looking after their members’ interests,’ said Alexander Krueger, chief economist at the Hauck Aufhaueser Lampe Privatbank. ‘This implies that any job cuts on a demographic curve up till 2030 are like the current job cuts announced today.