VW is apparently considering plant closures in Germany

As the VW Group will apparently miss its savings targets by several billion euros, the top management is planning further cuts. For the first time, possible plant closures and redundancies are being considered - also because electric cars bring in relatively little profit.

Last week, it was reported that VW was up to three billion euros short of its savings target. German publication der Spiegel now writes that “there is currently a gap of four to five billion euros in the financial plan of the Volkswagen and VW Commercial Vehicles brands.” There are many reasons for this, including higher material prices, the weakness of the US market and the cheaper equipment that customers are currently ordering during the economic downturn – but margins are particularly high for optional extras.

Additionally, the magazine writes that the comparatively low profit margins of electric cars are also a problem for the manufacturer. In total, enormous amounts are missing. Brand boss Thomas Schäfer also admitted as much at a management meeting on Monday. Further savings are needed to protect the brand from losses.

“The cost-cutting programme at VW is escalating and leading to a major conflict between management and the General Works Council,” wrote the Works Council on Monday. According to the Works Council, the brand management board has cancelled at least one major vehicle plant and one component factory in Germany. Product commitments that have already been made are also likely to be cancelled, such as a compact-class electric SUV planned for 2026 from the Wolfsburg plant.

VW itself has also confirmed that it is “cancelling the job security agreement that has been in place since 1994.” The current agreement would have run until 2029. In other words, instruments such as early retirement, partial retirement or termination agreements are no longer sufficient to slowly reduce the workforce. In the current situation, plant closures cannot be ruled out ‘without rapid countermeasures’. The situation is “extremely tense and cannot be overcome by simple cost-cutting measures.”

However, it is not yet known where VW intends to cut back. In view of the involvement of the state of Lower Saxony, the local plants in Wolfsburg, Hanover (VW Commercial Vehicles) and Emden as well as the component plants in Brunswick, Salzgitter and Osnabrück are actually considered untouchable. That leaves the MEB plant in Zwickau, the Transparent Factory in Dresden and the component plant in Kassel. Over 26,000 people are employed in Kassel, Dresden and Zwickau.

The smallest vehicle plant with 8,500 employees in production is located in Emden – the ID.4 and ID.7 are built there, and Emden will become an exclusively battery-electric car plant from 2025. However, the German state of Lower Saxony has so far protected the site with its 20 per cent voting rights. There have been repeated rumours of a possible sale of the Osnabrück components plant with its 2,300 employees – but not of a closure. The fact that Audi is openly discussing the option of closing its factory in Brussels was already seen as a turning point. This was previously unthinkable for Germany but is now being discussed nonetheless.

The VW Works Council rarely holds back from criticising the management and is now choosing very harsh words. “The Board of Management is questioning nothing less than the entire VW core brand. We will not allow ourselves to be wound up here,” said Works Council Chair Daniela Cavallo, announcing “fierce resistance from the employee side.”

spiegel.de, automobilwoche.de (both in German)