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The alarm bells are ringing and loud for Volkswagen. Faced with ever-increasing competition and faltering sales, the German carmaker has reportedly planned a series of cost-cutting measures including job cuts, salary cuts as well as the closure of at least three of its factories. Doing is involved. Volkswagen, the main brand within the Volkswagen AG family, is now facing the anger of its own employees as it plans to save itself up to $4.3 billion.
Things have been tough for one of the world’s largest carmakers. Volkswagen, headquartered in Wolfburg, Germany, is struggling to reverse falling sales in Europe. While many local players are facing heat from Chinese rivals, Volkswagen has had more to lose than any other. At an employee meeting earlier this year, Chief Financial Officer Arno Antlitz said the focus must be on increasing production and cutting costs to regain lost ground. Antlitz and Chief Executive Officer Oliver Blume were also heckled by employees at the time.
If it was an uproar then, now it’s all about massive protests. Volkswagen AG employees stopped work for an hour at all of the company’s production facilities in Germany to express their displeasure against wage cuts and factory closure plans. There are at least 11 company sites across the country and labor leaders are in talks with Volkswagen management about a possible solution, but hopes are not too high.
What’s the problem with Volkswagen?
Volkswagen is the main brand of the Volkswagen Group which also includes brands like Skoda, Lamborghini, Porsche, Audi and Bentley. Two major factors are influencing the fortunes – slow sales in Europe and massive expansion of Chinese companies like BYD. CEO Bloom has blamed the high costs on the Volkswagen brand, but employees largely point the finger at poor decisions at the management level, a faulty pricing policy and a focus on electric vehicles (EVs) that isn’t working.
(Also read: Porsche and Mercedes plan cost cuts amid weak demand and falling profits in China)
According to a report in Germany’s Handelsblatt, the Volkswagen brand is all set to announce drastic measures to cut costs and plant closures. But brands like Audi and Porsche, which have reported profits in recent times, are also facing headwinds. Porsche in particular admitted that the decline in its sales in China has hit it hard and that it will also consider cost-cutting when reviewing its product lineup.
Volkswagen is planning for the future
The Volkswagen brand in particular was busy portraying itself as a company that is ready to embrace a fully electric future. However, at present, the same future is not looking good at all with the disappointment of salary cuts, job cuts and plant closures. Even as the threat of mass protests by German workers – possibly from December 1 – looms, Handelsblatt reports that Volkswagen plans to include a universal wage cut of 10 percent and a suspension of wage increases for 2025 and 2026. Is included.
German workers are angry. Volkswagen’s top employee representative Daniela Cavallo had earlier warned that she would fight tooth and nail if any plans were made to close the factory. “Volkswagen is not ailing because of the cost of its German sites and German personnel,” he said in September. “Volkswagen’s problem is that the management board is not doing its job.”
With employees unwilling to give up even an inch and challenges looming for Volkswagen, the future may be more bitter than anticipated for the company.
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