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Volkswagen has walked back on its threat to close several German plants in the near term, striking a deal with its powerful works council that will save €4bn annually and stave off the risk of further strikes.
After more than 70 hours of negotiations with Europe’s largest carmaker, the works council late on Friday said the union had reached a deal that meant “capacity reduction for the German factories, but no closures”.
“No site will be closed, no one will be made redundant and our in-house collective bargaining agreement will be secured in the long term,” VW’s works council leader, Daniela Cavallo, said.
The works council, which controls half of the seats on VW’s supervisory board, said capacity at five of the VW flagship brand’s German factories would be reduced by 734,000 units annually but added there would be no lay-offs. In addition, workers agreed on a reduced intake of permanent jobs for trainees and a cut to some staff bonuses.
VW, meanwhile, said the deal would allow it to cut 35,000 jobs by 2030 “in a socially responsible manner” — meaning that it would seek to not replace workers who retire or accept a voluntary redundancy package.
The deal is far cry from what VW had initially said was demanded. In September, it warned that structurally lower sales in Europe — it sells roughly 500,000 fewer cars annually in its home region compared with before the pandemic — corresponded to a need to close “at least” three German factories.
On Friday, VW chief executive Oliver Blume called the agreement an “important signal for the future viability of the Volkswagen brand”.
Workers at the majority of German plants downed tools twice in December and the union had threatened that, were VW to not walk back on its plans to close plants, strikes would have continued.
Blume’s failed attempt to close some German plants producing VW-branded cars, making up roughly half of the group’s total, will come as a blow. His allies in Wolfsburg have maintained that, if anyone could successfully achieve what previous chief executives have attempted but never managed — significantly restructuring the carmaker — it would be Blume.
VW’s majority owner, the Porsche-Piech family, had also thrown its weight behind more hardline cost cuts due to the risk of diminishing dividend returns amid structural challenges for the automotive industry.
Aside from the sliding sales in Europe, the VW brand’s market share in China — its most profitable market — has nearly halved in just under five years. VW is now racing to develop cheaper electric vehicles as Chinese EV specialists such as BYD prepare to push into Europe.
