Volkswagen plans to close at least 3 German plants and cut thousands of jobs

Volkswagen plans to shut at least three German plants, axe tens of thousands of jobs and slash pay by 10 per cent, the business’s top employee representative said on Monday.

The restructuring would mark the first closure of domestic plants in the business’s 87-year history and set it up for a battle with powerful unions in Germany, where VW has 300,000 employees. There are 10 plants which are part of the VW’s core brand and could potentially be closed.

Europe’s largest carmaker has warned that radical measures are needed as it faces intense competition in China, slowing sales across other major markets and the require to navigate the costly shift to electric vehicles. It recently issued its second boost warning in three months, blaming a “challenging economy surroundings”.

VW on Monday said it would not comment on “investing about the confidential talks with [the union] IG Metall and the works council”, adding that the business was at a “crucial point”.

The business’s works council represents VW employees and holds half the seats on the supervisory board.

Daniela Cavallo, the head of VW’s works council, told staff at the business’s main Wolfsburg plant that executives had two days to reverse its plans, as she hinted at upcoming strikes.

She said chief executive Oliver Blume was “playing with the massive uncertainty that . . . we will shatter off the talks and do what a workforce has to do when it fears for its existence”.

Volkswagen first signalled in September that it was considering shutting German plants but analysts had remained sceptical given the powerful opposition from politicians and the works council.

The German state of Lower Saxony, a significant shareholder with control of 20 per cent of the voting rights, has previously said its priority is maintaining jobs and has often sided with the works council.

Like German rivals Mercedes-Benz and BMW, Volkswagen faces falling profits in China as consumers cut spending and local brands such as BYD receive economy distribute.

The German throng, which reports its quarterly results on Wednesday, now expects an operating boost spread of about 5.6 per cent in 2024, down from its earlier projection of 6.5 per cent to 7 per cent.

In a sign of the deepening pressures in the Chinese economy, Porsche, which is majority owned by VW, on Friday reported a 41 per cent plunge in quarterly profits.