Automotive News Europe — 2024-10-30
Automotive Industry
Volkswagen Group laid out a cost-savings proposal to workers that could avoid factory closures in Germany.
Arne Meiswinkel, the carmaker’s chief negotiator, said the plan includes a 10% pay cut and a revised bonus system.
The measures are meant to shore up the VW brand that is struggling with poor demand in Europe and intensifying competition in China.
The company did not address directly the issue of whether it planned to close factories in Germany for the first time in its 87-year history. Both management and labor leaders warned that plant closures remain a possibility if they fail to agree on cost-savings.
“We are open to any discussion to reach our financial goals,” Meiswinkel told reporters in Wolfsburg on 30 October 2024 after talks with labor leaders. Wages at the automaker would remain “highly attractive” even after the cuts, he said.
VW’s demands on pay need to be met to advance discussions on issues such as factories and jobs, Meiswinkel said. “Only if we find solutions together to achieve our financial goals can we imagine concrete prospects for the German locations and possible job security,” he said.
Hours before the negotiations, VW reported its least-profitable quarter in years, bolstering management’s case for pursuing drastic measures in Germany.
Labor leaders earlier this week flagged plans including the 10% wage cut as well as the closing of at least three factories in Germany.
VW union sees progress in wage talks
VW’s latest proposals represent a “first small signal” of progress, said IG Metall’s Daniela Cavallo, the automaker’s top labor leader. She said shuttering plants is not fully off the table and that workers remain “alarmed.”
IG Metall’s chief negotiator, Thorsten Groeger, said VW had signaled that it was prepared to discuss a future for all German sites, avoiding forced layoffs.
“Today, the company has basically declared its willingness to enter into a process with us, linked to its cost targets and its profitability targets, which also includes prospects for all locations and job security,” he said.
Labor bosses have long resisted changes at the main VW brand, which has botched several electric vehicle launches and is struggling with low returns.
Slumping sales in China and increasingly stiff competition in Europe, which has yet to return to pre-pandemic demand levels, have contributed to an earnings decline at the group. The VW brand, where most of the cuts would fall, earned just a 2.1% operating margin in the first nine months.
The European car market has shrunk by about 2 m vehicles since the pandemic, resulting in about 500,000 fewer unit sales for Volkswagen annually. Cheaper models from Tesla and Chinese carmakers have gained market share in Europe.
VW’s production costs are too high, CFO says
VW finance chief Arno Antlitz said: “We have not forgotten how to build great cars, but our production costs are far from competitive.”
Management says the German plants are far more expensive to operate than those of competitors because of high costs for workers and energy.
But worker representatives accuse management of bungling decisions and tearing up a treasured consensus on decision-making. They came into talks demanding a 7% pay rise and threatened strikes from December unless the company definitively ruled out plant closures.
Ahead of the talks, which took place at the stadium where the VfL Wolfsburg Bundesliga team plays its football, fretful employees and trainees left handwritten and typed letters on display on tables.
“The disappointment and the fear is great,” one wrote. “The family obviously doesn’t want me,” said another.
VW’s proposals are expected to be the start of more complex negotiations, with the next round scheduled for 21 November 2024. A grace period runs out at the end of next month, with warning strikes possible from 1 December 2024.