BERLIN — Volkswagen Group said it can no longer rule out closing plants in Germany as it looks for ways to save several billion euros extra at its core VW brand.
The automaker may also implement compulsory layoffs in Germany, ending a job security program that ruled out forced layoffs until 2029.
VW considers a major vehicle plant and a components factory in Germany obsolete, according to the automaker’s works council.
Any closure would mark the first such closures in Germany in the company’s 87-year history, putting VW at odds with powerful unions.
The IG Metall union has vowed “fierce resistance” to the plans.
“The board of directors today presented an irresponsible plan that shakes the foundations of Volkswagen and poses a huge threat to jobs and workplaces,” Thorsten Groeger of IG Metall said in a statement.
“We will not tolerate plans that the company makes at the expense of the workforce and that cause major disruption in regions across our country,” Groeger added.
The VW brand, which drives the majority of the automaker’s vehicle sales, is the first of the group’s brands to undergo a cost reduction campaign aiming to save €10 billion ($11.07 billion) by 2026 as it tries to optimize spending to survive the transition to electric cars.
Increasing VW brand returns has become more difficult with higher logistics, energy and work costs. The brand’s margin fell to 2.3 percent during the first half, compared with 3.8 percent a year ago. Efforts are becoming more difficult amid a faltering transition to EVs and a slowdown in consumer spending.
VW has also lost traction in China, its biggest market, as fast-moving Chinese rivals launch affordable, consumer-friendly electric cars. Those same Chinese automakers are now starting to expand into Europe, putting additional pressure on VW to develop cheaper EVs quickly or risk losing sales at home.
VW Group CEO Oliver Blume said a tough economic environment, new competitors in Europe and the declining competitiveness of the German economy meant the carmaker needed to do more.
“The economic environment has become even more difficult and new players are moving into Europe,” Blume said in a statement. “Germany as a business location is falling further behind in terms of competitiveness.”
A complete work The dispute would be a big test for Blume, who also heads sports car brand Porsche after union strife brought down several of his predecessors at VW.
Previous conflicts have ended or shortened the tenures of top executives, including former CEO Bernd Pischetsrieder, former VW brand chief Wolfgang Bernhard and Herbert Diess, Blume’s predecessor as CEO. All three have tried to drive efficiencies, particularly in VW’s domestic German operations.
VW employs around 650,000 workers globally, almost 300,000 of whom are in Germany. Half of the seats on the company’s supervisory board are held by work representatives, and the German state of Lower Saxony, which holds a 20 percent stake in the automaker, often sides with the unions.
Last year, the group built around 9 million vehicles worldwide, compared to a total capacity of 14 million units.
Sites under threat
In the past, analysts have named VW plants in Osnabrueck and Dresden as possible closure targets.
VW Group’s latest plans for more cuts follow a July announcement detailing the potential closure of a Brussels plant that makes electric Audis. The plant has struggled with high costs and low demand for the luxury Q8 e-tron, the only model it makes.
Works council chief Daniella Cavallo said management had made “many wrong decisions” in recent years, including not investing in hybrids or moving faster to develop affordable battery-electric cars.
Instead of closing plants, the board should reduce complexity and harness synergies between the group’s plants, Cavallo said in an interview on VW’s intranet.
Cavallo criticized the automaker’s “documentation madness” and “salami-slicing tactics.” Cavallo was referring to VW not only considering closing plants but also dissolving wage agreements and abandoning its commitment to job security and efficiency.
Cavallo also said that VW management claimed that making the Golf and Tiguan models threaten to become loss-making.
The works council said VW is also “questioning” the production of a compact electric crossover at the main plant car manufacturing site in Wolfsburg from 2026, essential to fill the factory capacity.
The Trinity brand’s flagship electric model, currently planned for Zwickaualso runs the risk of being delayed.
VW’s market value has fallen to around €51 billion ($56.5 billion) even as the company continued to make a profit with operating income of €22.6 billion last year.
Reuters and Bloomberg contributed to this report.