Volkswagen is considering drastic measures in Germany, including shutting three of its 10 factories, as it seeks to improve its financial situation.
Profits are down 64 per cent at the Volkswagen Group, and the automaker is considering drastic action, including shutting down German factories, letting tens of thousands of employees go, and cutting wages.
Oliver Blume, head of the Volkswagen Group, told Bild am Sonntag, “Weak market demand in Europe and significantly reduced earnings from China reveal decades-long structural problems at Volkswagen.”
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Oliver Blume, Volkswagen Group CEO
According to the CEO, sales – at least in Europe – aren’t the issue, as they are currently slightly ahead of 2023.
Last year, Volkswagen lost its status as China’s number one automotive brand for the first time since 1986, with BYD outselling the German marque by just over 300,000 units.
Mr Blume laid the blame for the company’s 64 per cent drop in profits primarily at the foot of labour costs in Germany, which he claimed were “often more than twice as high as the average of our [other] European locations”.
The CEO told Bild am Sonntag over the weekend “the goal for cost and capacity adjustment has been set”, but the path to get there can be “flexibly designed”.
To that end, Volkswagen has floated the idea of a 10 per cent wage cut to minimise job losses.
Headcount, it seems, will still be reduced. The German newspaper understands Volkswagen intends to offer hefty severance packages to employees, moving up the partial retirement scheme to those born in 1967, and shifting forward the enforced retirement plan to those born between 1961 and 1964.
Volkswagen “Glass Factory” in Dresden
There will also be fewer trainees brought on board and a general hiring freeze, while replacements won’t be sought for people who leave for whatever reason.
Volkswagen’s holiday and loyalty bonuses will be wound back or eliminated, while company car discounts are also on the chopping block.
Reports indicate Volkswagen is looking to save €10 billion ($16.3 billion) by 2026, and it has set aside €900 million ($1.5 billion) to handle restructuring costs.
Last week, the president of the company’s works council warned the public the Volkswagen Group was considering closing down three of its 10 German factories.
Analysts believe Osnabrück, where the soon-to-be axed Volkswagen T-Roc Cabriolet is produced, and Dresden, home to the glass factory where the ID.3 electric hatch is currently made, are the likeliest candidates for closure.
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