The deal will prevent immediate layoffs and enable future investments amidst a challenging economic climate.
Volkswagen Secures Deal to Prevent Plant Closures in Germany
Volkswagen Secures Deal to Prevent Plant Closures in Germany
Trade Union and VW Reach Agreement to Save Jobs While Reducing Workforce Over Time
Volkswagen has successfully negotiated a deal with the IG Metall trade union to avoid plant closures in Germany, thereby preventing immediate job losses. The agreement will, however, lead to the reduction of over 35,000 positions by the year 2030 in a manner deemed "socially responsible," with the goal of saving approximately €15 billion (£12.4 billion). The car manufacturer had warned earlier that it might need to close several plants to control costs for the first time.
After extensive negotiations that began in September, the union announced on Friday that a compromise had been reached which secures jobs and allows for future investments. VW had been contemplating shutting down up to three factories and sought a 10% pay cut from its workforce. Conversely, the union was pushing for a salary increase of 7%.
While the deal entails a decrease in production capacity across various plants, it has been hailed by union leaders. Daniela Cavallo, the chief of IG Metall’s works council, expressed satisfaction with the resolution, stating that "No site will be closed, no-one will be laid off for operational reasons, and our company wage agreement will be secured for the long term."
The job cuts will be achieved through various strategies, including early retirements. Additionally, a previously agreed 5% wage increase will be postponed for 2025 and 2026 to support company transformation efforts. The number of annual apprenticeships in Germany will also dwindle from 1,400 to 600 starting in 2026, alongside considerations to shift some production to Mexico.
Oliver Blume, VW's group CEO, labeled the agreement "an important signal for the future viability of the Volkswagen brand." The potential factory closures would have marked a historic first for the company.
The German automotive sector has been grappling with reduced demand for cars in China, a previously lucrative market, while facing growing competition from Chinese car brands entering Europe. During the negotiations, approximately 100,000 workers participated in "warning strikes" at various sites to exert pressure for a favorable outcome. The latest discussions commenced on Monday, with all parties keen on concluding before Christmas. German Chancellor Olaf Scholz commended the deal, describing it as a "good, socially acceptable solution."
After extensive negotiations that began in September, the union announced on Friday that a compromise had been reached which secures jobs and allows for future investments. VW had been contemplating shutting down up to three factories and sought a 10% pay cut from its workforce. Conversely, the union was pushing for a salary increase of 7%.
While the deal entails a decrease in production capacity across various plants, it has been hailed by union leaders. Daniela Cavallo, the chief of IG Metall’s works council, expressed satisfaction with the resolution, stating that "No site will be closed, no-one will be laid off for operational reasons, and our company wage agreement will be secured for the long term."
The job cuts will be achieved through various strategies, including early retirements. Additionally, a previously agreed 5% wage increase will be postponed for 2025 and 2026 to support company transformation efforts. The number of annual apprenticeships in Germany will also dwindle from 1,400 to 600 starting in 2026, alongside considerations to shift some production to Mexico.
Oliver Blume, VW's group CEO, labeled the agreement "an important signal for the future viability of the Volkswagen brand." The potential factory closures would have marked a historic first for the company.
The German automotive sector has been grappling with reduced demand for cars in China, a previously lucrative market, while facing growing competition from Chinese car brands entering Europe. During the negotiations, approximately 100,000 workers participated in "warning strikes" at various sites to exert pressure for a favorable outcome. The latest discussions commenced on Monday, with all parties keen on concluding before Christmas. German Chancellor Olaf Scholz commended the deal, describing it as a "good, socially acceptable solution."
