In a move that has sent shockwaves through Germany and the global auto industry, Volkswagen announced on Tuesday that it is scrapping a range of labor agreements, including a guarantee of jobs until 2029 at six German plants. This decision, part of a cost-cutting drive to combat competition from cheaper Asian rivals, raises the prospect of layoffs beginning next year, a move that worker representatives have vowed to resist fiercely.
The cancellation of these decades-old employment guarantees marks a significant shift for Europe’s top carmaker. It comes after Volkswagen issued a warning that it could shut down plants on German soil for the first time in its 87-year history, prompting high-level concern from the German government.
Gunnar Kilian, Volkswagen’s Labour Director, emphasized the need for cost reductions to ensure competitiveness and investment in new technologies and products. He announced that the company is offering to bring forward wage negotiations, a move intended to address the uncertainty surrounding the labor agreements. These talks were initially scheduled for mid- to late October, with potential strikes starting from the end of November. However, the works council has demanded that the talks commence this month.
Daniela Cavallo, head of Volkswagen’s works council, has pledged fierce opposition to layoffs and plant closures, blaming management for the company’s current challenges. The IG Metall union, representing workers, has previously suggested a four-day week as an alternative to closures, echoing a similar cost-cutting strategy implemented in the 1990s.
Volkswagen’s struggles arrive amidst economic uncertainty, characterized by weak growth, higher energy prices, and questions surrounding trade ties with the lucrative Chinese market. These factors are testing Germany’s established model for consensual industrial relations.
If the two parties fail to reach an agreement by next June, labor agreements in place before 1994 will come into effect. This scenario, described as a “crazy-sounding consequence” by Cavallo, would lead to a pay rise for employees at the six plants, but also pave the way for layoffs for operational reasons for the first time in decades.
The works council has highlighted the need for a negotiated compromise, warning that without one, Volkswagen could proceed with forced redundancies starting in summer 2025, but would face significant cost increases for remaining employees.
This conflict between Volkswagen and its workforce underscores the complexities of managing labor relations amidst global economic pressures and the evolving landscape of the automotive industry. The outcome of these negotiations will have implications not only for Volkswagen, but also for the future of German industrial relations.
