It is getting worse Volkswagen crisisThe employees of the Wolfsburg-based company have crossed his arms in Germany in protest against a massive staff cuts plan, that could lead to the closure of three factories and the loss of dozens of thousands of jobs. The metalworkers' union IG Metall, representing 120.000 Volkswagen brand workers, called this mobilization "the toughest collective bargaining battle that Volkswagen has ever known". These strikes could extend to 24 hours or even indefinitely if the next round of wage negotiations fails to produce an agreement.
Il business plan, aimed at reducing costs, has raised tensions after refusal by management of a union counter-proposal which included less drastic measures, such as the suspension of bonuses, a reduction in working hours and a freeze on wage increases. According to Thorsten Groeger, union negotiator, “Volkswagen is responsible for the duration and intensity of this confrontation.”
It must be said that the Volkswagen crisis takes on a particular resonance in the midst of the campaign for the parliamentary elections of 23 February in Europe's largest economy.
Volkswagen: The Reasons for a Deep Crisis
Volkswagen, symbol of the German automotive industry, is located in a critical phase. The competition from Chinese producers, the slowdown in the new car market and significantly higher personnel costs than European competitors are eroding its competitiveness.
In 2023, the group has earmarked the 15,4% of global revenues to personnel costs, a much higher value than competitors such as BMW and Stellantis, which stand between 9,5% and 11%. In Germany, the average hourly cost per employee is 62 euros, compared to 47 euros in France and 29 in Spain, generating a gap that weighs up to 77%. In addition to this, the German factory costs of the group are 25-50% higher than the company targets, with some structures being up to twice as expensive as the competition.
Secondo Thomas Schaefer, CEO of the Volkswagen brand, “high costs and low productivity put our competitiveness in the European market at risk”.
Volkswagen Crisis: The Cut Plan and the Head-On Confrontation
Volkswagen has announced a 4 billion euro savings plan to respond to financial pressures, which includes a 10% reduction in wages. The trade union, instead, had put forward a proposal cost savings worth 1,5 billion euros (without touching salaries), which included the suspension of bonuses for 2025 and 2026, but the German company said no.
This clash led to the decision to interrupt social dialogue and start strikes warning at all German plants. The company, for its part, declared that it “respects the right to strike” and that it is engaged in a “constructive dialogue“, while having taken measures to limit the impact of the mobilization on customers and partners.
Volkswagen crisis: risk of “social conflict”
Strikes could soon evolve into an indefinite interruption if an agreement is not found. Thousands of workers have already manifested at the Wolfsburg headquarters, with further protests in Hannover, Emden and Salzgitter.
The expiration of the previous truce agreement on Saturday has opened the way for a conflict that could have devastating repercussions. If no compromise is reached, Volkswagen could face additional costs estimated at 2 billion euros in 2024, with the risk of a new profit warning.
According to IG Metall, “we are ready for a social conflict like we haven't seen in decades."
The crisis of the German automotive industry
The Volkswagen case reflects a broader crisis in the German automotive sector. The transition to electric vehicles, difficulties in maintaining competitiveness and increasing imports from China are redefining the entire industrial landscape.
Volkswagen, which until a few years ago was an immovable pillar, is now finds itself at a crossroads. For the first time in 87 years of history, the company is at risk of close up to three factories in the country. The Wolfsburg group's ability to address these internal and external challenges will be crucial not only for its future, but also for the fate of thousands of workers and the entire German industrial sector. The next few weeks will be crucial to understand whether the Wolfsburg giant will be able to find a balance between economic sustainability and employment protection, or whether this conflict will mark one of the most critical pages in its history.
