Volkswagen warns of mass layoffs and historic plant closures

For the first time in my life, Volkswagen plans to close the doors of the facility on its territory. The company plans to close not one, but at least three plants in Germany as it faces growing pressure from China. Volkswagen also warned that mass layoffs and pay cuts were coming as the company seeks to cut costs.

Volkswagen plans layoffs and plant closures in Germany

Almost a year has passed since the appearance of Volkswagen. broke the news that it is considering closing its first plant in Germany in its 87-year history.

CEO Oliver Blume told employees that a three-decade-old promise to protect jobs was under threat. The commitment was implemented to protect VW employees and prevent layoffs until 2029.

The announcement comes as Germany’s largest carmaker in Europe has seen its market share and profits fall. A year later the situation worsened.

Now the company is warning that several German factories are at risk of closure. In addition, Volkswagen said mass layoffs and wage cuts are expected in its home market.

Daniela Cavallo, head of the Volkswagen works council (via F.T.), announced that the company plans to close at least three German plants, cut thousands of jobs and cut wages by 10%. According to a works council representative, the risk group includes ten factories that mainly supply VW cars.

Although Cavallo did not specify which plants are at risk, European Automotive News Earlier this month, a report said VW Audiu’s state-of-the-art plant in Brussels, where the Q8 E-Tron is built, has been deemed virtually useless amid falling demand.

Growing pressure from low-cost electric vehicles

Like its German rivals, Volkswagen faces increasing pressure from Chinese low-cost car makers such as BYD.

Having dominated its domestic market, BYD aims to support growth overseas in key markets such as Europe, Southeast Asia and Latin America.

BYD is already driving VW and other foreign automakers out of its home market with ultra-affordable electric models like Chaika EVthe cost of which in China starts from 10,000 US dollars (69,900 yuan).

With new models such as medium size Silyon 7 With an electric SUV launching in Europe, BYD continues to challenge legacy automakers on their home turf.

With market share shrinking at home and abroad, VW is facing falling profits, forcing it to cut costs and trim its vast production network to regain competitiveness.

In the first nine months of 2024, Volkswagen’s global deliveries fell 3% to 6.52 million units.

Although VW increased market share in North (+7%) and South America (+15%), the “competitive situation” in China (-10%) and Western Europe (-1%) offset this growth. In the domestic market, Volkswagen deliveries fell by 1.6%.

We’ll learn more about Volkswagen’s financial position, with third-quarter results due Wednesday. Porsche caught a glimpse after the announcement third quarter profit fell 41% on Friday. In September, deliveries of the luxury brand fell by 41%.