Volkswagen considers closing plants in Germany

Berlin — Volkswagen (VW) is considering closing factories in Germany for the first time, in a move that shows the pressure Europe’s top carmaker is facing from cheap Asian competition.

The move marks the first major clash between CEO Oliver Blume, who analysts have described as more of a consensus builder compared with his more combative predecessor, Herbert Diess, and unions that command substantial influence at VW.

VW considered one large vehicle plant and one component factory in Germany to be obsolete, its works council said as it vowed “fierce resistance” to the board’s plans.

Analysts have named VW sites in Osnabrück, in Lower Saxony, and Dresden, in Saxony, as potential targets for closure. Lower Saxony is VW’s second-largest shareholder and on Monday supported its review.

VW said it also felt forced to end its job security programme, which has been in place since 1994 and prevents job cuts until 2029, adding all measures would be discussed with its works council.

“The situation is extremely tense and cannot be overcome by simple cost-cutting measures,” VW brand chief Thomas Schaefer said in a statement.

VW was the first of its brands to undergo a cost-cutting drive targeting €10bn in savings by 2026 as it attempted to streamline spending to survive the transition to electric vehicles (EVs).

A difficult economic environment, new competitors in Europe and the falling competitiveness of the German economy meant VW needed to do more, Blume told its management.

Shares were up 2.57% as of 1.25pm GMT, after jumping about 1.5% directly after its announcement at 1pm GMT.

VW has lost almost a third of its stock market value over the past five years, making it the worst performing stock among the major European carmakers.

The IG Metall union called the announcement an irresponsible decision that “shakes the foundation” of the automaker, which is Germany’s largest industrial employer and Europe’s top carmaker by revenue.

Works council chief Daniella Cavallo said in an interview on Volkswagen's intranet that its management had made “many wrong decisions” in recent years, including not investing in hybrids or being faster at developing affordable battery-electric cars.

Instead of plant closures, the board should be reducing complexity and taking advantage of synergies across the group's plans, Cavallo argued, criticising the company’s “documentation madness” and “salami-slicing tactics”.

Cavallo was referring to VW not only considering plant closures, but also dissolving wage agreements and dropping its commitment to both job security and efficiency.

CFO Arno Antlitz will speak to staff alongside VW brand chief Thomas Schäfer at a works council meeting on Wednesday morning. Cavallo said she expected Blume to get involved in negotiations as well.

Reuters