Volkswagen considers closing factories in Germany for first time

The car giant has cited tough economic times as the reason for cost-cutting measures

Volkswagen may close down at least two factories in Germany and end job security schemes as part of a cost-cutting drive, the conglomerate has announced.

The car maker was the largest in the world by sales volume as late as 2017. It owns car, truck and motorcycle brands such as Audi, Bentley, Lamborghini, SEAT, Skoda, Porsche, Scania and Ducati.

Oliver Blume, chief executive of the VW Group, cited a “difficult economic environment” and “failing competitiveness of the German economy” among factors behind the decision.

“The situation is extremely tense and cannot be overcome by simple cost-cutting measures,” VW brand head Thomas Schaefer said in a statement on Monday.

According to management, Volkswagen also needs to end its job security program as part of the push to generate €10 billion ($11.07 billion) in savings by 2026. 

All measures need to be discussed with the Works Council, a trade union, which has already vowed “fierce resistance” to the plans.

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The Works Council claimed that VW has already marked one “large vehicle plant” and one component factory in German territory as obsolete. The IG Metall trade union called the announcement irresponsible and argued the plan “shakes the foundation” of Germany’s largest industrial employer.

The management has made “many wrong decisions” in recent years, such as not investing in hybrids or developing affordable electric cars, Works Council head Daniella Cavallo said on the company intranet. 

Cavallo criticized VW’s “documentation madness” and “salami-slicing tactics,” saying that the board should reduce complexity and take advantage of brand synergies instead, according to Reuters.

Chief Financial Officer Arno Antlitz and Schaefer are scheduled to meet with the Works Council on Wednesday. Cavallo said she expects Blume to get involved as well.

The German Association of the Automotive Industry warned last year that the country was “dramatically losing its international competitiveness” due to soaring energy costs. Russian President Vladimir Putin noted earlier this year that Western sanctions against Moscow have backfired mostly on Berlin and its industry.

According to Bloomberg, VW’s announcement is another blow to German Chancellor Olaf Scholz, after the poor showing by his coalition in regional elections in Thuringia and Saxony over the weekend.

Volkswagen’s stock was trading as high as €98.60 a share on Monday, surging 2.57% after the announcement.