Volkswagen Leadership Estimates "One or Two Years" to "Straighten Out the Situation" as Employees Protest Plant Closures

The leadership of the German vehicle manufacturer Volkswagen defended its cost reduction plans on Wednesday in a meeting with the works council and employee representatives. These plans include potential plant closures in Germany and consequent layoffs, which have led to street protests by workers.

Meanwhile, around 25,000 employees gathered at the company's headquarters in the northern city of Wolfsburg to voice their demands to both the group's management and the coalition government led by Social Democrat Olaf Scholz.

"We still have one year, maybe two, to straighten out the situation. But we must make use of this time," stated Volkswagen's CFO, Arno Antlitz, adding that the company has been "spending more money than it earns for years," a strategy that is unsustainable "in the long term."

The automotive company's CEO, Oliver Blume, amid a battle against the slowdown in demand for electric cars and facing competition from China, defended these plans and expressed his willingness to carry them out in a clear challenge to the country's unions.

Blume's remarks have angered IG Metall, Germany's main workers' union, whose primary objective is to maintain as many jobs as possible at the plants and safeguard working conditions in the largest economy in the eurozone.

Additionally, Daniela Cavallo, president of the works council, stated that Volkswagen's crisis is due to management, not employees. She argued that there should be no plant closures or wage cuts but rather an extension of job security for employees.

A spokesperson for Scholz's government confirmed that they would not interfere in the negotiation process as this is a crisis that the company itself must resolve internally. The chancellor acknowledges the importance of Volkswagen as one of the largest companies in the automotive industry and is aware of the transformation challenge facing the entire industry.

However, Economy Minister Robert Habeck admitted in recent hours that measures must be taken to ensure Germany remains a major car producer. Among recent actions, the German government has approved an incentive package for electric car purchases, including tax reductions amounting to an annual average of up to 465 million euros between 2024 and 2028.

From now on, companies will be able to deduct up to 40% of the value of newly acquired electric and zero-emission vehicles from their tax declaration during the year of purchase. This figure will gradually decrease until it reaches 6% at the end of the projected cycle before the end of this decade.

In this context, Berlin asserts that this is not just a labor crisis but that Volkswagen's stability is "vital" to ensure European automotive supply chains at a time of strong competition with Chinese brands entering community markets and ongoing trade wars with Beijing. The outcome of next month's U.S. presidential elections also remains uncertain.

Volkswagen has not closed any plants since 1998 when it shut down its factory in Westmoreland, USA.

However, the company's situation has changed in recent months. In July, the group admitted considering closing Audi's factory in Brussels (Belgium) due to declining demand for high-end electric cars.

Currently, Audi is considering advancing the end of production in Europe's capital for its Q8 e-tronic models following a drop in orders for electric vehicles and "structural challenges" at the site due to high manufacturing costs.

Volkswagen admitted then that repurposing or even closing the plant could impact up to 2.6 billion euros on its financial results in 2024.

Following the first phase of restructuring, according to unions, up to 1,500 employees—half of Audi's workforce in Brussels—could lose their jobs.