Closure of Three Volkswagen Plants in Germany, 10% Wage Cut Proposed

Strong Opposition from Labor... Possibility of Strike

Europe's largest automaker Volkswagen is planning to close at least three factories in Germany and cut overall employee wages by 10%.

According to German media, Daniela Cavallo, chairwoman of the Volkswagen Works Council and a union representative, revealed the company's proposal at an employee briefing held on the 28th (local time) at the Wolfsburg plant.

Chairwoman Cavallo stated that, besides the factories slated for closure, the company plans to reduce production at other sites and either relocate some departments overseas or outsource them.

She added, "All Volkswagen plants in Germany will be affected by this plan. No one can feel safe anymore," clearly expressing opposition.

Volkswagen operates 10 plants in Germany, including assembly and parts production, employing about 120,000 people. German media estimate that workforce reductions due to factory closures could reach up to 30,000 employees.

Earlier, the business daily Handelsblatt reported that Volkswagen has devised several scenarios to save 4 billion euros (6 trillion KRW) through a 10% wage cut, a wage freeze for the next two years, and factory closures.

In early last month, Volkswagen announced that due to worsening profitability, it must increase its cost-cutting target by an additional 4 to 5 billion euros (6 to 7.5 trillion KRW) on top of the existing 10 billion euros (15 trillion KRW) goal by 2026, and that it may close up to two factories in Germany. The company also scrapped its employment security agreement with the union, leaving open the possibility of layoffs.

However, wage cuts, factory closures, and layoffs have all met with union opposition. Ahead of the second round of negotiations scheduled for the 30th, the union has already proposed a 7% wage increase. Chairwoman Cavallo criticized, "The company is focusing solely on cost issues without a future strategy." With both sides at an impasse, there are forecasts that the union may launch a full-scale strike.

The German automotive industry is facing a crisis as the Chinese market, its largest, slows down and it falls behind in the competition to transition to electric vehicles. Industry insiders also point out that the European Union (EU) regulation banning the sale of internal combustion engine vehicles from 2035 is a hindrance.

Porsche, a luxury sports car brand under Volkswagen, has effectively revised its plan to convert 80% of its total production to pure electric vehicles by 2030. Porsche CFO Lutz Meschke said during the earnings announcement on the 25th, "I am not sure if the European industry can survive in an environment that unilaterally focuses on electrification," and stated that production at electric vehicle plants will be flexibly adjusted to also include internal combustion engine and hybrid vehicles.

Porsche reported that its sales from the first to third quarter this year decreased by 5.2% compared to the same period last year, totaling 28.56 billion euros (42.8 trillion KRW), and operating profit fell by 26.7% to 4.04 billion euros (6.5 trillion KRW). After sales in China plummeted by 32.6% in the first half of this year compared to last year, the company replaced its China head last month.