Volkswagen and Germany’s largest union, IG Metal, have wrapped up negotiations and finally come to an agreement over a dispute which threatened to close several factories across the country.
After five rounds of negotiations, the deal, announced on Friday, ensures continued operations at ten German factories and no immediate compulsory redundancies until 2030.
Both sides agreed that over 35,000 positions will be eliminated by 2030, but assurances were provided that these layoffs will be conducted in “socially responsible” ways like early retirement.
Volkswagen’s works council chief Daniela Cavallo, made the following comment regarding the deal: “No site will be closed, no one will be laid off for operational reasons and our company wage agreement will be secured for the long term.”
Union negotiator Thorsten Gröger said: “We have succeeded in finding a solution for employees at Volkswagen sites that secures jobs, safeguards products in the plants and at the same time enables important future investments.”
The compromise offers a bit of relief and sacrifice. Factories will stay open and no one will lose a job overnight. At the same time, wage increases have been frozen for 2025 and 2026, and some bonuses will vanish.
The company wants to save €15 billion a year through these measures, which it says is essential for its survival amid fierce competition and evolving consumer preferences.
Volkswagen has seen a slowdown in European demand. At the same time, competition from Asian rivals has ramped up and uptake of EVs has been slower than expected. In China, there’s been a wave of local brands entering the market.
“This is the company’s response to the declining automotive market in Europe and the increasingly intense competition, while at the same time creating the basic prerequisites for continuing to produce successfully at its home base in Germany,” VW said in a statement.
The question on many investors’ minds is whether these cuts will be sufficient to restore Volkswagen’s competitiveness in the market. The company’s share price has fallen by about 20% since the start of the year and investors have asked for deeper restructuring and a quicker response to global trends. How this all plays out? We’ll have to wait and see.