A Volkswagen Golf GTI is parked in the parking lot with a view of the brand tower inside the Volkswagen factory in Wolfsburg.
Image Alliance | Image Alliance | Getty Images
german car manufacturer Volkswagen It warned on Monday that it would no longer rule out closing factories in the country, citing the possibility of major cost-cutting measures to ensure the company is “future-proofed”.
The announcement was heavily criticized by trade unions, with Germany’s top industrial union IG Metall saying the plan “shakes the carmaker to its foundations”.
“The European automotive industry faces a very serious situation,” Volkswagen Group CEO Oliver Blume said in a written statement.
“The economic environment has become more severe and new competitors are entering the European market. In addition, Germany, especially as a manufacturing base, is falling further behind in terms of competitiveness.”
As a result, the Volkswagen Group CEO said the company “must take decisive action now”.
Shares of Volkswagen rose 2.2% on Monday afternoon.
Volkswagen said a “comprehensive restructuring” of brands within the company was needed, adding that the current situation meant that even the closure of car production and parts plants could no longer be ruled out.
Volkswagen stock year-to-date.
“The situation is extremely tense and cannot be resolved by simple cost-cutting measures,” Volkswagen brand CEO Thomas Schaefer said in a statement.
“That is why we want to start discussions with employee representatives as soon as possible to explore the possibility of sustainably restructuring the brand,” he added.
The carmaker said it also felt the need to end its Employment Protection Agreement, a job guarantee scheme in place since 1994, to ensure “urgent structural changes are needed to improve competitiveness in the short term”.
A spokesman for the German Finance Ministry did not immediately respond to CNBC’s request for comment.
‘A huge threat to jobs’
Volkswagen said all necessary measures will be discussed with the General Works Council and IG Metall. However, both groups were quick to condemn the proposals.
According to a Google translation, IG Metall area manager Thorsten Gröger said in a statement: “The board of directors today proposed an irresponsible plan that shakes Volkswagen to its foundations and casts doubt on work. and locations pose a huge threat.
“This approach is not only short-sighted, but extremely dangerous – it threatens to destroy the very heart of Volkswagen,” Groeger said.
Meanwhile, Daniela Cavallo, president of Volkswagen’s general union, vowed that the group would “violently oppose” the board’s proposal.
“The management committee failed. The result is an attack on our employment, our place and our collective agreement,” Cavallo said, according to a translator.
