Volkswagen Considers Factory Closures in Germany

By Victoria Waldersee and Christina Amann

BERLIN (Reuters) – Volkswagen is considering closing factories in Germany for the first time, indicating the mounting price pressure Europe’s top carmaker faces from Asian rivals.

This move marks a significant clash between Chief Executive Oliver Blume, described as a consensus builder, and influential unions at VW.

VW’s works council stated that one large vehicle plant and one component factory in Germany are considered obsolete, pledging “fierce resistance” to the executive board’s plans.

Chief Financial Officer Arno Antlitz and Volkswagen brand chief Thomas Schaefer will address staff during a works council meeting on Wednesday morning.

IG Metall union leader Daniela Cavallo anticipates CEO Blume’s involvement in the negotiations, describing the upcoming meeting as “very uncomfortable” for management.

Previous attempts at significant changes were thwarted by IG Metall, particularly during the departure of Herbert Diess as CEO in 2022.

Analysts have previously identified Volkswagen sites in Osnabrueck and Dresden as potential closure targets, with the state of Lower Saxony, a major shareholder, supporting the review.

Volkswagen employs around 680,000 staff and announced the end of its job security programme established in 1994, which previously prevented job cuts until 2029. All changes will be discussed with its works council.

Cavallo pointed out that the job security previously covered various VW plants.

Schaefer commented on the tense situation, stating that it cannot be resolved through simple cost-cutting.

VW, which drives most of Volkswagen’s unit sales, is the first brand undergoing a cost-cutting initiative aiming for 10 billion euros ($11 billion) in savings by 2026 to adapt to the shift towards electric vehicles.

Economic Challenges

Blume noted the difficult economic environment, increasing competition in Europe, and declining competitiveness of the German economy, indicating a need for change at Volkswagen.

Volkswagen shares rose by 1.2% following the announcement, but the company has lost nearly a third of its value over the last five years, underperforming compared to other major European carmakers.

The company faces challenges not only in Europe but in the U.S. and China, particularly from domestic EV manufacturers like BYD, which are capturing market share.

This situation poses a significant challenge for German Chancellor Olaf Scholz’s coalition, which faced criticism in recent regional elections.

Carsten Brzeski from ING Research suggested that the need for factory closures signals a wake-up call for German economic policies that must adapt to ongoing stagnation and structural changes.

Germany’s economy ministry urged VW management to act responsibly amid market challenges but did not comment specifically on the planned closures.

IG Metall stated that Volkswagen’s decision “shakes the foundation” of the company, which is Germany’s largest industrial employer.

Cavallo criticized management for recent wrong decisions, including inadequate investments in hybrid and affordable battery-electric vehicles. She urged the board to prioritize reducing complexity instead of plant closures, leveraging synergies across the Volkswagen group.

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