Alarm bells are ringing and ringing loud for Volkswagen. Faced with ever-increasing competition and stuttering sales, the German car manufacturer reportedly plans a series of cost-cutting measures which include job cuts, wage cuts as well as shutting down of at least three of its factories. The core brand within the Volkswagen AG family, Volkswagen is now also facing the ire of its own workers as it puts in place plans to save itself up to $4.3 billion.
The going has been tough for one of the largest car manufacturers in the world. Headquartered in Germany’s Wolfburg, Volkswagen has been struggling to arrest its declining sales in Europe. While several local players have been facing heat from Chinese rivals, Volkswagen had had more to lose than any other. At an employee assembly earlier this year, Chief Financial Officer Arno Antlitz said the focus ought to be on increasing production and cutting costs to recover lost ground. Antlitz and Chief Executive Officer Oliver Blume were even heckled by workers at the time.
If it was heckling then, it is all about massive protests now. Volkswagen AG workers paused work for an hour at all production facilities of the company in Germany to express their resentment against plans of wage cut and factory closures. There are as many as 11 company sites all across the country and while labour leaders have been in talks with Volkswagen management for a possible solution, hopes aren’t exactly high.
What’s plaguing Volkswagen?
Volkswagen is the core brand within the Volkswagen Group which also includes brands like Skoda, Lamborghini, Porsche, Audi and Bentley. Two key factors have been impacting the fortunes – lukewarm sales in Europe and massive expansion from Chinese companies like BYD. CEO Blume has blamed high costs at the Volkswagen brand but workers largely point fingers at bad decisions at the management level, faulty pricing policy and a focus on electric vehicles (EVs) that is just not working.
(Also read: Porsche and Mercedes plan cost cuts amid weak demand and profit decline in China)
As per a report in Germany’s Handelsblatt, Volkswagen brand is all set to announce drastic measures of cost cutting and plant closures. But even brands like Audi and Porsche which have reported profits in recent times are facing headwinds. Porsche in particular admitted that its sales slump in China has hit it hard and that it too would consider cost cuts while reviewing its product lineup.
Volkswagen plans for the future
Volkswagen brand in particular was busy portraying itself as a company that is all set to embrace an all-electric future. At present though, that same future isn’t quite electric with the gloom of wage cuts, job cuts and plant closures. Even as the threat of massive protests from German workers – likely from December 1 – looms, Handelsblatt reports that Volkswagen plans include a universal pay cut of 10 per cent and a suspension of wage increases for 2025 and 2026.
German workers are furious. Daniela Cavallo, Volkswagen’s top employee representative, had previously warned that she would fight tooth and nail if any plans for factory closures was put in place. “Volkswagen isn’t ailing because of its German sites and German personnel costs,” she had said in September. “Volkswagen’s problem is that the board of management is not doing its job.”
With workers appearing unwilling to cede even an inch of space and the challenges for Volkswagen staring at it, the company could find the future far bitter than perhaps anticipated.