Germany: VW – trouble ahead

Volkswagen is undergoing significant restructuring amid declining sales. It plans to close 3 plants in Germany and reduce the workforce by 10,000 – yet further evidence of the challenges faced by Europe’s auto industry.

What’s happening: This week, Daniela Cavallo, the chair of the VW works council, told a meeting that the company planned to close 3 plants in Germany, cut headcount by 10,000, and reduce pay by 10%. IG Metall is pushing for a 7% increase during the next pay round. (See previous stories on this situation)

Meanwhile, in Brussels talks are ongoing over the closure of VW’s Audi plant, with the last cars scheduled to roll off the production line in late February 2025. Unions and employees’ representatives are in discussion over severance terms for the plant’s 3,000 workers. While such talks would be tense at the best of times, they have become even more tense as whatever is agreed in Brussels will clearly set a baseline for negotiations in Germany. 

The Big Picture: European car industry is under serious pressure as a result of falling demand, which has never returned to pre-Covid levels, the difficulty of transitioning from petrol to electrical propulsion, and competition from lower-cost and technologically better Chinese manufacturers. 

Europe’s automotive industry employs nearly 14mn people and accounts for 7% of the EU’s GDP. It is heavily unionised, and its unions have always been leaders in setting pay and working conditions standards. Outside of the public services, it is one of the last bastion’s of the union movement in Europe.