Volkswagen and labor leaders are closing in on a deal to restructure the brand without closing German plants, people familiar with the matter said
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Volkswagen and labor leaders are closing in on a deal to restructure the brand without closing factories in Germany, people familiar with the matter said.
Volkswagen and labor leaders are closing in on a deal to restructure the automaker’s namesake brand without closing factories in Germany, people familiar with the matter said. Management is willing to keep the plant open until 2030 and reinstate job security deals in exchange for workers giving up bonuses, people familiar with the matter said.
Other cost-cutting measures discussed include moving production of the Golf hatchback from the Wolfsburg plant in Germany to Mexico and halting production of Volkswagen-branded electric vehicles in Zwickau to cut capacity, people familiar with the matter said.
New labor deal will restore job security by 2030
A deal would prevent widespread strikes and provide a fresh start for Chief Executive Officer Oliver Bloom, who is seeking to turn around Europe’s largest carmaker. Volkswagen is working to reduce costs and excess capacity in its German production network as China’s market share shrinks and demand for electric vehicles slows in Europe and the United States.
Details of the agreement could change and talks expected to last until Friday could still end without a deal, people familiar with the matter said. The two sides have been holding a fifth round of talks since Monday. Spokespeople for Volkswagen and IG Metall declined to comment.
The latest proposals are a far cry from the significant savings Volkswagen has previously proposed. Management has proposed job cuts, wage cuts and the closure of three German factories to help save 17 billion euros ($17.6 billion) at the Volkswagen brand, which is struggling with inefficiencies in Europe and rising competition from China.
UBS analyst Patrick Hummel said on Thursday that employees giving up bonuses and restructuring Volkswagen’s production would not be enough to save the extra 4 billion euros a year that management needs to boost profit margins. “We’re not sure this is really the final solution,” he told Bloomberg Television.
Under the deal being finalized, production of the Volkswagen ID.3 hatchback and ID.4 SUV will end in Zwickau and move to Wolfsburg and Emden, people familiar with the matter said. Zwickau also risks losing the Cupra Born hatchback to Wolfsburg, leaving the eastern German plant with only Audi models and chassis production.
To make up for lost production capacity, Zwickau is considering a car recycling project that would require up to 1,000 jobs, people familiar with the matter said. Wolfsburg is preparing to produce the Volkswagen e-Golf, which will use a new platform developed with Rivian Automotive Inc. and is expected to enter service in 2028.
Volkswagen’s corporate structure gives employees a strong say in key decisions, making it difficult for management to unilaterally push for painful cost cuts. Employee representatives hold half of the seats on the company’s supervisory board, while Volkswagen’s home state of Lower Saxony holds two other seats.
Previous conflicts with unions have terminated or shortened the tenures of executives including former CEO Bernd Pischetsrieder, former Volkswagen brand CEO Wolfgang Bernhard ) and Bloom’s former CEO, Herbert Diess. All three are trying to improve efficiency, particularly at Volkswagen’s domestic operations in Germany.
Volkswagen remains one of Germany’s largest employers and any layoffs would ripple through Europe’s largest economy. The country’s political campaign kicked off on Monday after Prime Minister Olaf Scholz failed a confidence motion in the lower house of parliament, triggering new federal elections that could be held on February 23 , 7 months ahead of schedule.
Shares of Volkswagen fell 0.4% in Frankfurt. This year they are down 22%.
Automakers are grappling with slowing sales in Europe, where rising costs of living put pressure on consumers to balk at the high prices of electric vehicles. The European Automobile Manufacturers Association said on Thursday that new car registrations in the region fell 2% year-on-year to 1.06 million units in November, with new car registrations falling sharply in France and Italy.
Volkswagen’s peer Stellantis NV is trying to recover from a disastrous year that led to the ouster of former CEO Carlos Tavares. Manufacturers each face billions of euros in fines if they fail to meet tougher European fleet emissions rules due to take effect next year.
Suppliers have also announced significant cost-saving measures to cope with the slump in demand. Parts makers including Robert Bosch GmbH, ZF Friedrichshafen AG and Schaeffler AG are seeking to cut thousands of jobs due to the impact of the epidemic on industrial supply chains.
Volkswagen’s negotiations have dragged on in part because of their complexity. The negotiations focus not only on wages at the Volkswagen brand, but also on model planning for the Volkswagen factory network and the company’s five-year investment planning process.
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First published date: December 20, 2024 6:39 pm IST