Volkswagen could close German factories amid competitive market

ONE OF THE WORLD’S MOST ICONIC CAR MANUFACTURERS, VOLKSWAGEN, IS CONSIDERING CLOSING ITS GERMAN FACTORIES FOR THE FIRST TIME IN ITS 87 YEAR HISTORY. 

IT WOULD BE AN UNPRECEDENTED MOVE THAT COULD RESHAPE ITS LEGACY. 

AS THE AUTOMOTIVE GIANT GRAPPLES WITH FIERCE COMPETITION FROM ELECTRIC VEHICLE MAKERS AND STRUGGLES TO MAINTAIN ITS FOOTHOLD IN A CHALLENGING MARKET.

THE AUTOMAKER ACKNOWLEDGED THAT PLANT CLOSURES IN ITS HOME COUNTRY ARE A POSSIBILITY AMID INCREASING COMPETITION FROM CHINESE ELECTRIC VEHICLE MAKERS. 

VOLKSWAGEN GROUP CEO OLIVER BLUME STATED THAT THE EUROPEAN AUTOMOTIVE INDUSTRY IS FACING SEVERE CHALLENGES, WITH NEW COMPETITORS ENTERING THE MARKET AND GERMANY FALLING BEHIND THE COMPETITION.

IN THE FIRST HALF OF THE YEAR, VOLKSWAGEN SAW A 7% DROP IN DELIVERIES IN CHINA, ITS BIGGEST MARKET, AND AN 11% DECLINE IN “GROUP OPERATING PROFIT.” 

THE COMPANY FACES STIFF COMPETITION FROM LOCAL EV BRANDS LIKE BYD, WHICH ARE IMPACTING ITS PERFORMANCE IN BOTH CHINA AND EUROPE.

WHILE CLOSING FACTORIES COULD BE A GOOD MONEY-SAVING MOVE FOR THE COMPANY –

THE WORKERS – WOULD BE OUT OF A JOB.

TRADE UNIONS LIKE IG METALL –  HAVE STRONGLY CRITICIZED THE POTENTIAL FACTORY CLOSURES, ACCUSING VOLKSWAGEN OF MISMANAGEMENT AND THREATENING JOBS.

A UNION SPOKESPERSON SAYING GERMAN FACTORY CLOSURES WOULD “DESTROY THE HEART OF VOLKSWAGEN”.

BUT ANOTHER TIER IN VOLKSWAGEN’S COST-SAVING PLAN IS EFFORTS TO **TERMINATE AN EMPLOYMENT PROTECTION CONTRACT WITH LABOR UNIONS – WHICH HAS BEEN IN PLACE SINCE 1994.

DESPITE THE TURMOIL, VOLKSWAGEN’S CEO FOR PASSENGER CARS EMPHASIZED THE COMPANY’S COMMITMENT TO GERMANY AS A BUSINESS LOCATION. HE ALSO URGED FOR URGENT TALKS WITH EMPLOYEE REPRESENTATIVES TO EXPLORE SUSTAINABLE RESTRUCTURING OPTIONS. 

VOLKSWAGEN EMPLOYS NEARLY 683,000 PEOPLE WORLDWIDE, WITH ABOUT 300 THOUSAND IN GERMANY. THE COMPANY STRESSES THAT THE CURRENT SITUATION REQUIRES MORE THAN JUST COST CUTS AND WILL NEED COMPREHENSIVE RESTRUCTURING TO ADDRESS THE CHALLENGES.

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