Frankfurt (Germany) (AFP) – Volkswagen’s CEO told employees Monday a further 50,000 jobs could go at the struggling auto giant, according to an internal memo seen by AFP, confirming reports the group is targeting 100,000 cuts worldwide. The German car titan has come under intense pressure from US tariffs, slimmer profit margins from electric cars, and above all, intense competition in key market China, whose carmakers are now also increasingly exporting to Europe.
Last week, management at the 10-brand group began what could be a long and tough process of thrashing out job cuts in talks with the supervisory board as workers protested at plants nationwide. With pressure mounting for Europe’s biggest carmaker to publicly outline its cost-saving plans, chief executive Oliver Blume told workers in the memo that the group must “act now” to safeguard its future. “We need to become more efficient, more robust and simpler. We must reduce our costs,” he said.
VW’s costs are about 20 percent higher than competitors’, Blume said, adding that overheads need to be cut to a “competitive level.” “As half of our overheads stem from staff costs, a theoretical calculation — assuming no change in labour costs — would result in the loss of around 50,000 jobs,” he said. This comes on top of 50,000 jobs that the carmaker is already in the process of cutting in Germany, about 35,000 of which will go at its namesake brand, under a 2024 deal with unions. VW is also the parent company of car brands ranging from SEAT to Audi and Porsche.
If the group were to cut 100,000 positions, it would be the biggest restructuring in the history of the global auto industry, eclipsing the 50,000 job cuts General Motors made after it declared bankruptcy in 2009. Blume also confirmed the future of four German factories was uncertain. “The truth is also that, as things stand today, we cannot confirm that the Emden, Hanover, Zwickau, and Neckarsulm plants will be able to operate competitively into the 2030s,” he said.
Any restructuring is likely to be hard-fought. Labour representatives and the German state of Lower Saxony, both of whom take a dim view of plant closures, together hold more than half the seats on the supervisory board. VW’s Wolfsburg headquarters and several of its plants are in Lower Saxony.
Unions have strongly criticised VW and Blume for unsettling employees by allowing media reports of mass job cuts to circulate without comment, demanding the CEO take a public stand. In the memo, Blume insisted leaks to the media had been unplanned and said that reports of looming cuts had “annoyed” him. “The disclosure of such confidential, sensitive information not only unsettles our workforce; it is also damaging to the business,” he said.
Some industry analysts have suggested that Volkswagen had deliberately publicised the number of 100,000 as a negotiating tactic, and that the final figure of cuts is likely to be lower. Volkswagen is not alone among German carmakers in seeing its business suffer in recent times. BMW and Mercedes-Benz have also suffered falling profits, in particular due to increased competition from local rivals in China, the world’s biggest auto market.
Speaking on Monday, a spokesman for the IG Metall called Blume’s memo “superficial” and said employees were still left in the dark. “Management’s communication remains a disaster across the board,” he said, adding that shop stewards were organising meetings at which Blume would be expected to take questions from staff in person. “The answers will determine the crucial question: whether the executive board intends to overcome the crisis with staff or against them,” he said. “If the latter, a proper fight is on the cards.”
© 2024 AFP
