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Volkswagen may be forced to drop its pledge to protect jobs dating back to 1994 which promised no layoffs until 2029.
Oliver Blume, CEO of Volkswagen Group, shared a memo with staff in which he conceded that tough economic conditions for the automotive sector meant plants could be shuttered in Germany, the company’s home country.
“The European automotive industry is in a very demanding and serious situation,” he said in the memo which cited “particularly significant challenges.”
Blume highlighted the increasingly tough headwinds in which automakers now operate. “The economic environment became even tougher, and new competitors are entering the European market,” he said.
Volkswagen considers layoffs to reduce costs
A review by the company’s board earlier determined that brands under Volkswagen AG require a “comprehensive restructuring.”
"In the current situation, even plant closures at vehicle production and component sites can no longer be ruled out," Volkswagen stated in the note sent to staff.
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Previous attempts to trim costs with buyouts and early retirements may not have proven sufficient to offset the need for layoffs. "Simple cost-cutting measures" are no longer enough, the memo continued.
Volkswagen has not closed a plant since 1998, per a Deutsche Presse-Agentur news agency report, when it closed a facility in Westmoreland, Pennsylvania.
Labor groups will “fight bitterly” against Volkswagen plant closures
Unions representing workers at Volkswagen have criticized the possibility of plant closures and any subsequent layoffs.
Thorsten Groeger, Chief Negotiator at IG Metall, a powerful industrial union representing thousands of Volkswagen workers, described the threat of closures as “not only shortsighted, but dangerous, as it risks destroying the heart of Volkswagen.”
"We as a company must now act decisively," Volkswagen’s CEO said in the memo.
In response, Daniela Cavallo, chairwoman of the company’s work council, claimed that “management has failed.”
“The consequence is an attack on our employees, our locations and our labor agreements. There will be no plant closings with us,” she asserted.
“This puts VW itself and the heart of the group at risk. We will fight bitterly against this.”
The automaker is also facing pressure from its local state government as well as labor groups.
Stephan Weil, a governor in the Lower Saxony region of Germany and a board member at Volkswagen, suggested the company should consider alternative paths to reduce costs and added his government will “pay particularly close attention” to the actions taken by the automaker.
