Volkswagen considers closing German factory for the first time in 87 years, layoffs may be inevitable

Recently, according to media reports, Volkswagen issued a statement on September 2, considering closing factories in Germany to further reduce expenses. The shutdown plan includes a larger car factory and a parts factory, involving Volkswagen’s main passenger car brand. This will be the first time in 87 years of Volkswagen's history that it has shut down factories in Germany, and involves reneging on the commitment not to lay off staff before 2029.

According to media reports, Daniela Cavallo, chairwoman of Volkswagen's works council, stated in a report to employees that last year's cost-cutting plan was several hundred million euros less than expected, causing its flagship brand to fall into a loss.

Cavallo said: "As a result of these incidents, the executive board is now questioning the German factories, the collective wage agreement within Volkswagen, and the job security plan that lasts until the end of 2029."

Volkswagen CEO Oliver Blume said in a statement, "The economic environment has become more difficult, new players are entering Europe, and as a place of business, Germany is falling further behind in terms of competitiveness."

At the same time, the statement also stated that it will attempt to terminate the agreement reached with the union to ensure employment stability until 2029, which could lead to conflicts between the company and the union. The chairman of the works council claimed that management is ineffective.

Volkswagen's financial report for the first quarter of this year showed that sales in the first quarter reached 75.5 billion euros, a decrease of 1% year-on-year; operating profit was 4.6 billion euros, a decrease of 20% year-on-year; global sales were 2.1 million units, down 2% year-on-year. The second quarter financial report shows that second-quarter revenue was 83.34 billion euros, a year-on-year increase of 4.1%; operating profit was 5.46 billion euros, a year-on-year decrease of 2.4%; global sales were 2.244 million units, a decrease of 3.8% year-on-year; the first half of the year delivered 4.348 million vehicles, a year-on-year decrease of 0.6%.

The overall performance of the financial data for the two quarters is general. Especially in terms of operating profit, Volkswagen's performance in the first half of the year is not ideal, which may also be the reason for Volkswagen's cost cutting.

Facing the Chinese market that has contributed the largest proportion of sales to Volkswagen for decades, Volkswagen is gradually losing its footing. In the first half of this year, Volkswagen's sales in China were 1.345 million units, a year-on-year decrease of 7.4%, accounting for 30.9% of Volkswagen's total sales.