Volkswagen Group is seeking significant cost reductions as it faces declining demand, rising expenses, and mounting competition. The automaker has proposed a 10 per cent wage reduction for its union employees after IG Metall, the union representing Volkswagen’s workforce, requested a seven per cent raise. This wage cut comes as part of broader measures Volkswagen is considering to address financial difficulties, which include restructuring bonuses and possibly eliminating anniversary and monthly bonuses.
Despite these proposed changes, Volkswagen’s CEO Thomas Schafer has not ruled out more drastic options, such as plant closures, if cost-cutting goals are not met through negotiations. “Successful operations are a prerequisite for job security,” said Arne Meiswinkel, VW’s lead negotiator, highlighting the necessity for lower labour costs to stabilise the company.
Volkswagen reported a steep 42 per cent drop in third-quarter operating profits, and its core brand posted only a two per cent operating margin through September. According to CFO and COO Arno Antlitz, this underscores the need for “significant cost reductions and efficiency gains” to sustain the company’s operations.
Rumours of potential plant closures in Germany have circulated as the company confronts inefficiencies across several domestic sites. Schafer remarked that the issues cannot be resolved by “simple cost-cutting measures,” indicating deeper structural challenges within the automaker’s German manufacturing operations.
Volkswagen and IG Metall will resume negotiations on November 21.
