Group must save

5 billion € shortfall: VW threatened with plant closures

(Bild: APA/dpa/Jochen Lübke)

As the Volkswagen Group announced on Monday, plant closures and compulsory redundancies can no longer be ruled out as part of a strict cost-cutting program. In addition, the previous job guarantee, which ruled out compulsory redundancies until 2029, will be terminated.

The Board of Management presented a corresponding program to the Works Council. VW CEO Oliver Blume said at the management event that the automotive industry was in a very challenging and serious situation. Germany was falling further behind in terms of competitiveness. "In this environment, we as a company must now act consistently."

Austria has a large supplier industry, which supplies the major German car manufacturers in particular.

Works Council announces resistance
Head of the Works Council Daniela Cavallo accused the Management Board of failure and announced resistance to the plans. "With us, there will be no site closures," she said in an internal statement. "Instead of unilaterally cutting costs at the expense of the workforce, we must now make a strategic move to free up the company and boost the actual construction sites: Product, complexity, processes, synergies." This is not an issue for the VW brand, but for the entire Group.

According to management, at least one plant is superfluous
In a statement from the works council, it was said that the management considers at least one larger car plant and one component factory to be superfluous. "This means that the focus is on all German sites - regardless of whether they are Volkswagen AG sites or subsidiaries, whether in western or eastern Germany," it said. It initially remained unclear which specific plants could be eliminated.

Expert sees "overdue wake-up call"
"This shows once again what the long-term consequences of years of economic stagnation and structural change are in an environment without growth. The automotive industry is not only symbolically important for Germany, but also a key industry for the economy," said economics expert Carsten Brzeski. "We have already seen a steady rise in insolvencies and unemployment in Germany recently. If such an industrial heavyweight really does have to tighten its austerity measures and close plants, it may be an overdue wake-up call that the economic policy measures taken so far need to be significantly increased."

Following the announcement of the stricter austerity measures, VW shares outperformed all other stocks in the leading German share index DAX on the Frankfurt Stock Exchange. At their peak, the shares rose by up to 2.1 percent.

Five billion euros missing
VW had launched a cost-cutting program aimed at increasing earnings by ten billion euros by 2026. This also included job cuts. VW brand boss Thomas Schäfer said that the program was having an effect, but that the headwinds had become much stronger. According to media reports, the savings this year will be five billion euros less than originally planned.