Volkswagen considers closing German plants amid rising competition
- Volkswagen is dropping its no-layoffs pledge and may close plants in Germany due to challenges in the automotive market.
- The company is facing increased competition from inexpensive Chinese electric cars and has seen a significant drop in operating earnings.
- Union officials and the governor of Lower Saxony are urging Volkswagen to avoid layoffs and plant closures by finding alternative cost-saving measures.
Volkswagen has announced that it may close plants in Germany due to significant challenges in the European automotive market. The company is abandoning a no-layoffs pledge that has been in place since 1994, which would have protected jobs until 2029. CEO Oliver Blume highlighted the increasing competition from low-cost Chinese electric vehicles and the declining manufacturing appeal of Germany as key factors necessitating decisive action. Despite efforts to cut costs through early retirements and buyouts, Volkswagen's core brand has seen a drop in operating earnings, falling from 1.64 billion euros to 966 million euros year-on-year. The company is struggling to meet its target of 10 billion euros in cost savings by 2026, prompting discussions about potential layoffs and plant closures. Union representatives have criticized management's approach, arguing that it threatens the core of Volkswagen and the livelihoods of its employees. They assert that the company has failed to explore alternative cost-reduction strategies that would avoid job losses. The governor of Lower Saxony, where Volkswagen is headquartered, has urged the company to consider other options before resorting to plant closures. He emphasized the importance of protecting jobs and maintaining the company's workforce, indicating that the state government will closely monitor Volkswagen's actions moving forward.