Released November 11, 2024 | GALWAY, IRELAND
en
Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--German car-making giant Volkswagen AG (VW) (Wolfsburg, Germany) has unveiled major cost-cutting measures that might include the closure of up to three German manufacturing plants, reducing investment in planned projects, wage reductions and job cuts.
The cost-cutting exercise is needed to address "decades of structural problems" within the company, according to Volkswagen's Chief Executive Officer Oliver Blume, speaking with Bild am Sonntag newspaper. "The weak market demand in Europe and significantly lower earnings from China reveal decades-long structural problems at VW. Our costs in Germany must be massively reduced." VW employs around 120,000 people in Germany where it operates at 10 locations, six of them in the northern state of Lower Saxony, including Wolfsburg. Industrial Info is tracking four major projects, three located in Germany, worth just under US$6 billion in investment. Subscribers to Industrial Info's Global Market Intelligence (GMI) Project Database can click here for the reports. VW's ambitious plan to transform the company to an electric vehicle (EV)-only firm has been beset by problems and costly delays, as well as a sharp downturn in European EV sales in 2024.
Blume added: "Our labor costs here, for example, are often more than twice as high as the average for our European locations. There is also a need for action in our development and sales costs and in other cost areas when compared to our competitors." VW has so far not confirmed the plant closures, which would be the first in the company's 87-year history but it has set aside 900 million euro (US$981 billion) for the cost-cutting programme. The possible closures were confirmed by powerful worker's union IG Metall, which is representing tens of thousands of VW workers in acrimonious talks. VW recently called for a 10% decrease in wages. In September, the company abandoned its 30-year-old employment protection agreement as part of an attempt to save billions of euros.
General Works Council Chairwoman Daniela Cavallo spoke at the main plant in Wolfsburg: "The Board of Management wants to close at least three VW plants in Germany. It claims that it cannot proceed without such a cutback. The Board is also planning to downsize all remaining plants in Germany. In concrete terms, this means taking out even more products, volumes, shifts and entire assembly lines far beyond what we have already done. All German VW plants are affected by this. None of them are safe."
The company reported its lowest quarterly profit in three years last month, including a sharp fall in sales to its largest market, China, which represents 40% of the company's global market. Like other German car makers, it is concerned about the impact of Europe's steep tariff on Chinese car imports that came into force this month and proposed countermeasures by Beijing. Last month, Industrial Info reported that Europe was to press ahead with significant tariffs on Chinese-made EVs after a divided vote among European Union nations. The tariffs will range from 17% to 36% depending on the carmaker and the level of cooperation with the investigation, and will be added to the existing 10% tax already in place. For additional information, see February, 2024, article - Europe Votes 'Yes' on Chinese EVs Tariffs.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
The cost-cutting exercise is needed to address "decades of structural problems" within the company, according to Volkswagen's Chief Executive Officer Oliver Blume, speaking with Bild am Sonntag newspaper. "The weak market demand in Europe and significantly lower earnings from China reveal decades-long structural problems at VW. Our costs in Germany must be massively reduced." VW employs around 120,000 people in Germany where it operates at 10 locations, six of them in the northern state of Lower Saxony, including Wolfsburg. Industrial Info is tracking four major projects, three located in Germany, worth just under US$6 billion in investment. Subscribers to Industrial Info's Global Market Intelligence (GMI) Project Database can click here for the reports. VW's ambitious plan to transform the company to an electric vehicle (EV)-only firm has been beset by problems and costly delays, as well as a sharp downturn in European EV sales in 2024.
Blume added: "Our labor costs here, for example, are often more than twice as high as the average for our European locations. There is also a need for action in our development and sales costs and in other cost areas when compared to our competitors." VW has so far not confirmed the plant closures, which would be the first in the company's 87-year history but it has set aside 900 million euro (US$981 billion) for the cost-cutting programme. The possible closures were confirmed by powerful worker's union IG Metall, which is representing tens of thousands of VW workers in acrimonious talks. VW recently called for a 10% decrease in wages. In September, the company abandoned its 30-year-old employment protection agreement as part of an attempt to save billions of euros.
General Works Council Chairwoman Daniela Cavallo spoke at the main plant in Wolfsburg: "The Board of Management wants to close at least three VW plants in Germany. It claims that it cannot proceed without such a cutback. The Board is also planning to downsize all remaining plants in Germany. In concrete terms, this means taking out even more products, volumes, shifts and entire assembly lines far beyond what we have already done. All German VW plants are affected by this. None of them are safe."
The company reported its lowest quarterly profit in three years last month, including a sharp fall in sales to its largest market, China, which represents 40% of the company's global market. Like other German car makers, it is concerned about the impact of Europe's steep tariff on Chinese car imports that came into force this month and proposed countermeasures by Beijing. Last month, Industrial Info reported that Europe was to press ahead with significant tariffs on Chinese-made EVs after a divided vote among European Union nations. The tariffs will range from 17% to 36% depending on the carmaker and the level of cooperation with the investigation, and will be added to the existing 10% tax already in place. For additional information, see February, 2024, article - Europe Votes 'Yes' on Chinese EVs Tariffs.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
