Volkswagen remains immersed in a crisis that requires the deployment of profound measures. The CEO of the VW Group, Oliver Blume, insisted this Tuesday in Wolfsburg, in his first address to the workers since the layoff plans became known, that the German giant is experiencing a moment of weakness, reiterating his message from recent weeks in which he has even spoken of a “critical” situation.
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In front of about 10,000 workers and amid boos, Blume stated that their current margins (3.8%) “are not sufficient to finance our future.” This brings closer staff cuts – talks of 100,000 departures, although unions fear 140,000 – as well as cuts in production and efficiency. Volkswagen had already agreed on 50,000 departures across several brands, so at least 50,000 more are being considered. Of these, half would be in Germany, Blume said today, according to Bloomberg. The rest would be international, within a network of more than one hundred companies.
The company, owner of brands such as Volkswagen, Audi, Seat, and Cupra, among others, has a workforce of about 620,000 worldwide; one in five jobs could be lost if the worst fears are confirmed. “Everyone has to participate, this is the biggest transformation program in our history,” Blume assured. The executive acknowledges a disadvantage of up to 30% in certain costs compared to competitors. In Germany, this translates to an extra 1.5 billion euros per year.
The company is dragging down results due to lower demand, high costs in Germany, strong Chinese competition, high investments in electrification, and the impact of tariffs in the U.S. “Tariffs, new competitors, and geopolitical risks: the entire automotive industry is under enormous pressure,” he summarized.
The worst-case scenario involves cutting one in five jobs
The boss faced thousands of workers for the first time since rumors of major cuts emerged, at the start of a tour of group plants to explain the measures. Without mentioning concrete figures, since Blume speaks of a “theoretical” starting point to equalize costs with the competition, he assured that voluntary departures will be used “when possible.” The measures will be defined in consultations with the unions.
The words come amid outraged worker representatives. They criticize the lack of transparency and errors in communicating possible departures. On the table is a plan to cut 100,000 jobs that became known through the German press and about which many details are missing.
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The works council fears, as they have stated on some occasions, that the figure could rise to 140,000 workers if the company decides to close plants. Rumors have pointed to Zwickau, Emden, Hannover, Osnabrück – all Volkswagen plants – and Neckarsulm – Audi’s – as affected. This has been denied by management. “Plant closures are the last and most costly resort,” Blume told employees. “We want to create robust prospects for German plants in the next 6 to 12 months,” he added.
“We cannot work with a boss who does not tell the truth to his employees,” said the chairwoman of the works council, Daniela Cavallo. “Factories are an integral part,” she added. The workers’ representative points out that trust in the group’s leadership and in Blume in particular “is damaged, but not irreparable,” as she conveyed to the workers before Blume spoke. “Cooperation is possible, but if management chooses only the path of layoffs and cuts, we will oppose it with all our strength,” declared Thorsten Groeger, from the powerful IG Metall union, after the meeting.
Measures pending the supervisory board
The CEO and the unions have been clashing for months. Last July they met at the supervisory board, a body where shareholders and unions are present and where major decisions and adjustments are approved. This body now has a majority of representatives against the adjustments, which blocks labor measures. After this meeting, the company announced it is considering eliminating half of its model line, a 10% cut in production capacity, and that the varieties offered will also be reduced by 75%, all within a “new phase of transformation” to improve figures.
The board is scheduled to meet again on September 4, Reuters reports. The particular structure will require negotiation. According to Reuters, unions and the state of Lower Saxony, a shareholder, will present alternative proposals to the restructuring next week.
Until June, Volkswagen earned 3.103 billion euros, 31% less due to the collapse in the Chinese market. It also reduces sales in Europe and America.
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