VW announces layoffs: Shock in Wolfsburg

The car company VW is suffering from weak sales figures and has to cut costs. The workforce is criticizing that they have to pay the price for the mistakes of the management.

VW Group CEO Oliver Blume has advocated higher executive salaries Photo: Michael Kappeler/dpa

Berlin taz | This has never happened before in the history of Volkswagen’s German plants: layoffs and closures of entire production facilities. Without rapid countermeasures, it cannot be ruled out that car plants and component factories will be closed, the company’s management said in an internal statement. “The situation is extremely tense and cannot be resolved through simple cost-cutting measures.” The carmaker did not reveal which plants were specifically affected.

The union and the works council are appalled. Works council chairwoman Daniela Cavallo accused the management of failure and announced in a special edition of the works council newspaper Have a say “fierce resistance.” “For us, closing sites is out of the question.”

She makes serious accusations against the management board, which she says focused primarily on purely electric cars and missed the trend towards hybrid vehicles. The management board’s announcement that it wanted to terminate the collective agreement on job security early also caused great outrage. It actually runs until 2029.

Plant closures and layoffs have so far been taboo at VW’s German plants. The VW law of the former state-owned company stipulates that decisions about production sites may only be made if at least two-thirds of the supervisory board agree. Closures or relocations abroad are virtually impossible without the consent of employee representatives.

Business in China in particular is weakening

In addition, the state of Lower Saxony is one of the largest shareholders and holds 20 percent of the voting rights. And the state government in Hanover is also interested in preserving jobs. Last but not least, it is stated that one in five jobs of the approximately 600,000 VW employees worldwide are in Lower Saxony.

The fact that the VW board is now threatening layoffs and plant closures shows how dramatic the situation has become for Europe’s largest car company. Volkswagen has been suffering from weak sales figures and massively increased costs for months.

Business is particularly weak in China, the world’s largest car market. Volkswagen was the leading car manufacturer there for a long time. The Wolfsburg-based company sold almost every second vehicle in the People’s Republic. The VW brand had to hand over this title to its Chinese competitor BYD at the end of 2022. While 19.3 percent of new car sales in China were accounted for by the VW Group’s brands in 2020, last year this figure was only 14.5 percent.

Transformation to electric cars missed

What is causing the company problems there is that VW has missed the transition to electric cars. The electric car market in China is booming, but VW has a market share of just under 3 percent in this segment. VW’s electric cars cannot keep up, especially when it comes to battery technology and software, the two key areas of modern electric cars. The combustion engine business, which has long been the source of profit for the Wolfsburg-based company, has largely come to a standstill in the People’s Republic.

In order to keep up with the Chinese competition, VW is currently investing billions in a new research and development center – albeit in China. In Germany, the sale of electric cars has been interrupted again after the federal government spontaneously cut subsidies for the purchase of an electric car at the turn of the year.

In order to be able to manage the urgently needed investments in electromobility, savings are needed at the main plant in Wolfsburg, which is already under-utilised. However, there is already a huge gap in the savings programme decided in 2023, which is intended to reduce costs by ten billion euros by 2026. Insiders told the HandelsblattTwo to three billion euros are missing, the Manager Magazine There is even a shortfall of five billion euros.

Diesel scandal has cost billions

Another reason why VW is lagging behind in technological development: The company had to set aside billions in the wake of the diesel scandal in 2015. In 2015, Volkswagen was forced by pressure from the US Environmental Protection Agency (EPA) to announce that it had manipulated toxic diesel emissions using software. This ensured that the engines complied with the nitrogen oxide limits on the test bench, but emitted many times more on the road. The then CEO Martin Winterkorn was subsequently forced to vacate his post.

He was actually supposed to appear in court in 2021 along with four other VW managers. However, the proceedings were postponed for health reasons and only started on Tuesday. The Braunschweig court has scheduled 89 hearings for the time being.