Employees of Volkswagen Saxony GmbH stand at the gates of the Volkswagen factory with Saxony Minister of Economy Dirk Panter (SPD, M).
Picture Alliance | Picture Alliance | Getty Images
volkswagen The beleaguered auto giant is preparing for a high-stakes boardroom showdown after reports the beleaguered auto giant is considering closing four factories in Germany and cutting up to 100,000 jobs.
The mass layoff plan, the most fundamental overhaul of the company in its nearly 90-year history, is firmly opposed by German parliamentarians and powerful labor unions.
The standoff lays the groundwork for what is shaping up to be the German industry’s most anticipated corporate event of the year, with Volkswagen management seeking approval from the company’s supervisory board on July 9.
Manager Magazine, which first reported news of the company’s restructuring plans on Friday, said the supervisory board would have to approve cost-cutting activities.
Automotive analysts said Volkswagen’s notoriously complex board structure meant the company’s management faced a difficult road ahead.
A Volkswagen spokeswoman declined to comment ahead of the July 9 meeting. The company has previously declined to comment on the reported job cuts and plant closures, saying decisions are made and approved by the relevant governing body.
“The entire group, including our brands and subsidiaries, must undergo major changes,” a Volkswagen spokesperson said.
Europe’s biggest carmaker had already laid out plans for deep job cuts and launched a major product offensive to counter pressures ranging from U.S. import tariffs to increased competition from Chinese car brands.
However, the recently reported job cuts are double the 50,000 job cuts previously announced and are said to include the closure of four German plants: Audi facilities in Hannover, Zwickau, Emden and Neckarsulm.
volkswagen law
Thomas Besson, head of automotive research at Kepler-Cheuvreux, said Volkswagen’s management needed to demonstrate at the July 9 supervisory board meeting that there were no alternatives to these measures.
“It would be a very complex move to implement,” Besson said, especially given that the German state of Lower Saxony, where Volkswagen is based and operates several facilities, is a major shareholder.
The state holds 20% of Volkswagen’s voting rights and has significant influence over the company due to the so-called Volkswagen Act. This decades-old move turned the company into a joint-stock company, effectively limiting management’s ability to shut down plants.
“They have no choice but to adjust. It’s going to be a very complex process with stakeholders. So it’s a tough job for VW management right now,” Besson told CNBC’s “Early Edition of Europe” on Wednesday.
Employees of Volkswagen Sachsen GmbH stand with their arms crossed in front of the Volkswagen factory gate.
Picture Alliance | Picture Alliance | Getty Images
Volkswagen’s General Works Council and German industrial union IG Metall have pledged to oppose the reported layoffs and plant closures. “If such a plan goes ahead, we will do our best to prevent it,” the two countries said in a joint statement, according to a translation.
Volkswagen’s decision to consider job cuts and plant closures was met with strong opposition from Chancellor Friedrich Merz’s coalition government, which is suffering from historically low approval ratings.
German government spokesman Stefan Cornelius said at a press conference on Monday that the government’s ultimate goal is “to preserve the location of German manufacturers and guarantee jobs,” according to a translation.
Volkswagen has reached a deal with unions in late 2024 that avoids factory closures in Germany and excludes forced layoffs until the end of 2030.
“Strategic step”
Rico Luhmann, senior sector economist specializing in transportation and logistics at ING, said Volkswagen’s resistance to the reported restructuring plan could pave the way for a tumultuous period of negotiations.
“It’s very complicated, but certainly something has to happen, so the audit committee should recognize the urgency,” Luhmann told CNBC in a video call.
Luhmann said Volkswagen’s challenges were illustrative of the headwinds facing the broader European car industry, citing challenges on the road to full electrification, competition from Chinese car brands and export issues in key markets.
Volkswagen stock price so far this year.
“They’re still making a profit, right? But the reported plan is to prepare for extinction or losses in the coming years. So this is a strategic step for what’s to come in the future,” he added.
Volkswagen shares fell slightly on Wednesday, trading at levels not seen since the summer of 2010. The company’s stock, which has fallen nearly 33% since the beginning of the year, hit a 52-week low after news of the accelerated restructuring first emerged last week.
