Volkswagen Faces Union Backlash Over Plant Closures and Layoffs

WOLFSBURG, Germany (Reuters) – Volkswagen (ETR:VOWG_p) and its powerful unions are set to clash on Wednesday over management's plans to close several plants and implement mass layoffs as Europe's largest automaker confronts high costs and increasing competition.

The discussions taking place at Volkswagen's headquarters in Wolfsburg coincide with the release of the company's third-quarter results, which are expected to reveal weak demand contributing to a crisis arising nearly a decade after the dieselgate emissions scandal.

Management aims to close at least three plants in Germany, marking a historic first for the company, while also proposing significant job cuts and a wage reduction of at least 10%, as noted by labor leaders.

These proposals have sent shockwaves through Europe's largest economy, which is already struggling with sluggish growth, especially in its industrial sectors.

Earlier this week, works council head Daniela Cavallo warned that talks could be terminated, heightening the possibility of strikes, as Volkswagen management appears to have abandoned a long-standing consensus-based approach with workers.

Unions are constrained from initiating wider strikes until December due to a pre-existing truce, but labor leaders have signaled that workers will take action to resist what they view as a breach of established norms.

Scheduled for 11:00 CET (10:00 GMT), Wednesday's discussions will see Volkswagen present proposals aimed at addressing the current challenges. Management argues that operating costs in German plants are significantly higher than those of competitors, exacerbated by rising expenses for labor and energy, all while the European car market continues to contract from pre-pandemic figures and demand in China diminishes.