Volkswagen is considering closing its factories in Germany to cut costs as it faces increased competition from Chinese electric car manufacturers entering the European market.
According to CNN, Volkswagen, one of the world’s largest car manufacturers, has stated that it cannot rule out shutting down production sites in its home country. Other measures to “safeguard the future” of the company include attempting to terminate an employment protection agreement with labor unions, which has been in place since 1994.
“The European automotive industry is in a serious and challenging situation,” said Oliver Blume, CEO of the Volkswagen Group. “The economic environment is becoming more difficult, and new competitors are entering the European market. Especially in Germany, as a competitive location, but it is falling behind.”
The carmaker began its cost-cutting efforts of 10 billion euros (equivalent to 11.1 billion USD) at the end of last year as it struggles to maintain its market share in China, its largest market. In the first half of 2024, vehicle deliveries to customers in China fell by 7% compared to the same period in 2023. Operating profit decreased by 11.4% to 10.1 billion euros (equivalent to 11.2 billion USD) accordingly.
The poor performance in the Chinese market is due to Volkswagen’s struggle to compete with domestic electric car brands, particularly BYD, which is also becoming one of the major “threats” to its business in Europe.
Volkswagen’s cost-cutting plans will face strong opposition from labor representatives, who hold almost half of the seats on the company’s supervisory board, the body that appoints executive directors.
IG Metall, one of the most powerful unions in Germany, attributes Volkswagen’s shortcomings to poor management and has declared that it will fight to protect the rights of its workers.
According to the latest income report, Volkswagen employs nearly 683,000 workers worldwide, including approximately 295,000 in Germany.
Thomas Schaefer, CEO of Volkswagen Passenger Cars, stated that the company remains committed to considering Germany as “a business location.” He added that VW will promptly begin negotiations with employee representatives to explore the possibility of “sustainably restructuring the brand.”
Volkswagen stated, “The current situation is extremely tense and cannot be resolved through simple cost-cutting measures.”
TT (Tuoitrethudo)
References: CNN
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