For the first time ever, Volkswagen plans to shut the doors to a facility on its home turf. The company plans to close not one but at least three plants in Germany as it faces mounting pressure from China. Volkswagen also warned mass layoffs and pay cuts are coming as it looks to cut costs.
Volkswagen plans layoffs, plant closures in Germany
It’s been almost a year since Volkswagen broke the news that it was considering closing its first plant in Germany in its 87-year history.
CEO Oliver Blume told employees that a three-decade-old job protection pledge was at risk. The pledge was implemented to protect VW employees and prevent layoffs through 2029.
The announcement came as Germany’s largest automaker’s market share and profits slipped in Europe. A year later, the situation has worsened.
The company is now warning that multiple German plants are at risk of closing. In addition, Volkswagen said mass layoffs and pay cuts are coming in its home market.
Daniela Cavallo, head of Volkswagen’s works council (via FT), announced the company plans to close at least three German plants, cut thousands of jobs, and slash pay by 10%. According to a spokesperson from the work council, the at-risk plants include the ten that primarily supply VW brand vehicles.
Although Cavallo didn’t specify which plants are at risk, an Automotive News Europe report earlier this month suggested VW’s state-of-the-art Audiu plant in Brussels, where the Q8 E-Tron is built, was deemed essentially worthless amid falling demand.
Mounting pressure from low-cost EVs
Like its German rivals, Volkswagen is facing mounting pressure from low-cost Chinese automakers like BYD.
After dominating its home market, BYD is looking to sustain growth overseas in key markets like Europe, Southeast Asia, and Latin America.
BYD is already squeezing VW and other foreign automakers out of its home market with ultra-affordable electric models, like its Seagull EV, which starts at under $10,000 (69,900 yuan) in China.
With new models, like the mid-size Sealion 7 electric SUV, launching in Europe, BYD continues challenging legacy automakers on their home turf.
With market share slipping at home and abroad, VW is facing falling profits, forcing it to cut spending and shrink its extensive production network to regain competitiveness.
Volkswagen’s global deliveries were down 3% to 6.52 million units through the first nine months of 2024.
Although VW gained market share in North (+7%) and South America (+15%), a “competitive situation” in China (-10%) and Western Europe (-1%) offset the growth. In its home market, Volkswagen’s deliveries fell 1.6%.
We will learn more about Volkswagen’s financial situation, with Q3 earnings due out on Wednesday. Porsche gave a glimpse after announcing that third-quarter profits slipped 41% on Friday. The luxury brand’s deliveries are down 41% through September.
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