Volkswagen Is Considering Closing Factories in Germany Amid Mounting Pressure from Asian Rivals

WOLFSBURG, Germany – Volkswagen is considering closing factories in Germany, a decision that underscores the mounting price pressure from its Asian competitors, particularly in the electric vehicle (EV) market.

This potential move, unprecedented in Volkswagen’s modern history, could mark the first major clash between Chief Executive Oliver Blume and the company’s powerful unions.

Volkswagen is reportedly reviewing the closure of one large vehicle plant and one component factory, which the company’s works council has deemed obsolete.

The potential closures are part of a broader strategy to cut €10 billion ($11 billion) in costs by 2026, as the automaker strives to survive the EV transition.

Chief Financial Officer Arno Antlitz and Volkswagen brand chief Thomas Schaefer will address employees at a highly anticipated works council meeting on Wednesday, where tensions are expected to run high.

Works council head Daniela Cavallo, a leading member of the IG Metall union, has already vowed “fierce resistance” to the company’s plans.

Cavallo has also indicated that CEO Blume will likely need to step in personally, stating that the upcoming meeting will be “very uncomfortable” for Volkswagen’s management.

Blume, known for his consensus-building leadership style, finds himself in a precarious position.

His predecessor, Herbert Diess, often clashed with unions, which ultimately contributed to his departure in 2022.

Now, with Volkswagen under intense financial strain and facing heightened competition, Blume may be forced to make difficult decisions that could shake the company’s foundation.

A significant part of the controversy revolves around Volkswagen’s job security program, which has been in place since 1994 and protects workers from job cuts until 2029.

This program covers the company’s flagship plants in Wolfsburg, Hanover, Braunschweig, and several other locations.

The end of this long-standing guarantee has sparked outrage from IG Metall, which represents a considerable portion of Volkswagen’s 680,000-strong workforce.

Volkswagen’s stock saw a brief 1.2% rise after the news, but the company’s overall market performance has been dismal, with its share value plummeting nearly 30% in the past five years.

The rise of Chinese EV makers, particularly BYD, has eroded Volkswagen’s once-dominant position, leaving it struggling to keep pace in the rapidly evolving global market.

“This is a wake-up call,” said Blume, addressing Volkswagen’s management.

He emphasized that the company must adapt to a challenging economic landscape, not just in Europe but also in key markets like China and the U.S., where its competitiveness has waned.

Cavallo has publicly criticized Volkswagen’s leadership for making “many wrong decisions” in recent years, such as its slow adoption of hybrids and failure to develop affordable battery-electric vehicles quickly enough.

Rather than closing plants, she argues, Volkswagen should focus on reducing operational complexity and leveraging synergies across the group’s various brands.

Volkswagen’s struggles also come at a difficult time for German Chancellor Olaf Scholz, whose government is facing backlash after a poor showing in regional elections, where the far-right Alternative for Germany (AfD) made significant gains.

The potential factory closures could rise political tensions, with Volkswagen’s troubles serving as a stark reminder of Germany’s declining industrial power and economic stagnation.