Volkswagen (VWAGY, Financial), Europe's largest automaker, is preparing to shut down at least three factories in Germany as part of its strategy to significantly reduce costs and enhance competitiveness. Volkswagen's Chairman of the Works Council, Daniela Cavallo, announced these drastic measures, which include a 10% pay cut for the main Volkswagen brand and a reduction in the scale of operations across all remaining factories in the country.
In Wolfsburg, Cavallo addressed a gathering of Volkswagen workers, highlighting the need to cut back on production, output, shifts, and entire assembly lines beyond current levels. CEO Oliver Blume pointed out that the high costs are impacting the Volkswagen brand, which is struggling with declining demand in the European market and intensifying competition in China. Union members expressed concerns that workers are bearing the repercussions of the board's strategic missteps, including a flawed transition to electric vehicles and poor pricing policies.
Cavallo's remarks were part of a series of rallies organized by labor groups at multiple Volkswagen plants in Germany. This sets the stage for a contentious week for the automaker, with expectations of declining sales and profits in the upcoming third-quarter report.
The cost-cutting measures at Volkswagen could potentially endanger tens of thousands of jobs in Germany. Cavallo also revealed that the luxury car brand Porsche has terminated its production relationship and future model planning with the Osnabrück plant.
Since issuing its second profit warning in three months at the end of September, Volkswagen has faced challenging times. While high-end brands like Audi and Porsche have historically been significant profit contributors, they are currently under pressure. Last Friday, Porsche announced considerations for cost reductions and a review of its model lineup due to decreased demand in the Chinese market.
Negotiations have yet to yield results, and a grace period will conclude next month. Warning strikes at Volkswagen's German facilities could commence from December 1.
