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Volkswagen, Europe's largest automaker, is facing a reckoning in its home market of Germany. In a move that marks a historic shift for the company, Volkswagen has announced plans to shut down at least three factories in Germany and lay off tens of thousands of workers as part of a major cost-cutting and restructuring effort.
The plans, which were revealed by Volkswagen's works council chairperson Daniela Cavallo, come as the German automotive giant faces intense pressure from a confluence of challenges - soaring energy and labor costs, fierce competition from Asian rivals, weakening demand in Europe and China, and a slower-than-expected transition to electric vehicles.
"This is the plan of Germany's largest industrial group to start the sell-off in its home country," Cavallo warned employees at Volkswagen's biggest plant in Wolfsburg. She did not specify which particular factories would be closed, but said that "all German VW plants are affected" and that "none of them are safe."
Volkswagen also intends to cut salaries at its brands by at least 10% and freeze pay in both 2025 and 2026 as part of the overhaul. The company's human resources board member Gunnar Kilian acknowledged the gravity of the situation, stating: "The fact is: the situation is serious. Without comprehensive measures to regain competitiveness, we will not be able to afford essential future investments."
Thomas Schaefer, who heads Volkswagen's brand division, said the company's German factories were not productive enough, operating 25-50% above targeted costs - meaning some sites were twice as expensive compared to the competition. He said Volkswagen would need to outsource more tasks that rivals had already shifted to external providers.
The works council's comments mark a major escalation in the conflict between Volkswagen's labor representatives and management. Unions in Germany wield significant influence, holding half the seats on Volkswagen's supervisory board. The powerful IG Metall union has vowed "fierce resistance" to the company's plans, with its lead negotiator Thorsten Groeger warning that if Volkswagen "confirms its dystopian path on Wednesday, the board must expect the corresponding consequences on our part."
This showdown comes as Germany's economy faces the prospect of a second consecutive year of contraction, putting pressure on Chancellor Olaf Scholz's government to act. Volkswagen's woes also reflect a broader challenge facing Germany's industrial backbone, with the country's dominance threatened by more nimble and cost-effective competitors.
Volkswagen's radical restructuring plans signal the depths of the crisis facing one of Germany's industrial giants.
