The white and blue VW logo stands on the roof of the brand tower on the grounds of the VW factory in Wolfsburg.
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German auto giant Volkswagen is gearing up for a showdown with unions shortly after it said it could not cut factories in its home country for the first time in nearly 90 years.
Volkswagen management is expected to lay out plans before about 18,000 workers at a town hall meeting in Wolfsburg Wednesday morning, amid speculation that the car could push to close sites in Osnabrueck in Lower Saxony and Dresden in Saxony.
A Volkswagen spokesperson was not immediately available for comment when contacted by CNBC on Tuesday.
In a move that underscores the challenges facing Europe’s top legacy automaker, Volkswagen warned Monday that it will not be able to rule out factory closures in Germany.
The Wolfsburg-headquartered company also said it needed to end its labor protection agreement – a job security program that has been in place since 1994 – to secure “urgently needed structural adjustments for greater competitiveness in the short term.”
The logo of the German car manufacturer Volkswagen (VW) appears on the front of the Volkswagen ID. The Buzz Pro electric van at the International Motor Show (IAA) in Munich, southern Germany, on September 5, 2023.
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Volkswagen Group CEO Oliver Blume said in a written statement on Monday that the automaker must “act decisively” to prove the company.
“The European automotive industry is in a demanding and serious situation,” said Blume.
“The economic environment is becoming more difficult, and new competitors are entering the European market. In addition, Germany in particular as a manufacturing location is declining in terms of competitiveness,” he added.
Volkswagen said all necessary measures would be discussed with the Public Works Council – a group of elected staff members representing the interests of the company’s workforce – and with the German industrial union IG Metall. Both groups, which have significant influence over the company, have been highly critical of the proposal.
Daniela Cavallo of Volkswagen’s Public Works Council said the faction would “fight hard” against potential factory closure measures, while a spokesman for IG Metall described the plan as “shaking Volkswagen’s foundations and posing a major threat to jobs and locations. .”
‘A central pillar for growth’
Shares of Volkswagen dipped 0.8% at around 2:15 London time on Friday, giving the results of the previous session. Volkswagen’s share price has fallen more than 33% over the past five years.
The decline comes amid a tough economic environment for automakers and the entry of new rivals in Europe, as Volkswagen tries to survive the transition to electric cars.
“The situation is very tense and cannot be resolved by simple cost-cutting measures,” VW brand CEO Thomas Schäfer said on Monday.
“This is why we want to start discussions with employee representatives as soon as possible to explore the possibility of a sustainable restructuring of the brand,” he said.
Shares from Volkswagen over the past five years.
Volkswagen’s plan to consider unprecedented factory closures in Germany comes at a politically charged time for Europe’s biggest economy. Led by Chancellor Olaf Scholz, the three-way coalition in Berlin suffered a heavy blow in the regional vote at the weekend.
“The German automotive industry is a world-wide success product and innovation. It is a central pillar for growth and prosperity in Germany,” a German government spokesman told CNBC via email, without commenting specifically on Volkswagen’s planned measures.
“At the same time, we are currently in a challenging phase of transformation towards electromobility. This also requires the adaptation of traditional structures and measures for greater competitiveness,” added the spokesperson, according to Google translation.
“Close social partnerships are a hallmark of the German automotive industry. The Federal Government is therefore asking the social partners involved to fulfill this responsibility in the future.”
Thomas Besson, head of automotive research at Kepler Cheuvreux, said the problems at Volkswagen reflect “an industry-wide story.”
“We’re seeing a major fragmentation story in the global automotive landscape,” Besson told CNBC’s “Street Signs Europe” on Tuesday.
“The situation … is also special for Volkswagen, because it has made some guarantees for the workers,” he said.
— CNBC’s Annette Weisbach contributed to this report.