Volkswagen bold overhaul puts 300,000 German jobs at risk, announces 10% salary reductions

Volkswagen (VW) workers in Germany are bracing for a wave of layoffs and possible factory closures as the auto giant gears up for a radical cost-cutting overhaul to address spiraling costs and competitive pressures. Tens of thousands of jobs are at stake, a move that could deeply affect the workers and families who rely on Europe’s largest automaker for their livelihoods.

For Volkswagen’s workforce, the impact is immediate. Daniela Cavallo, VW’s works council head, warned that the restructuring is “not just a bargaining tactic.” Addressing thousands of employees gathered in Wolfsburg, Cavallo cautioned, “This is the plan of Germany’s largest industrial group to start the sell-off in its home country.”

While VW has not specified which plants might be affected, the proposed closures and job cuts would impact its estimated 300,000-strong German workforce. The automaker is also reportedly planning a salary cut of at least 10% for many employees, along with a pay freeze in both 2025 and 2026, a blow to workers already grappling with rising costs of living.

Facing Financial Pressures

The looming changes come as VW grapples with high labor costs, intensifying competition from Asia, and slower-than-expected growth in its electric vehicle (EV) segment. “German factories are simply too costly, operating between 25% and 50% over target,” said Thomas Schaefer, who leads VW’s brand division, in a company statement. Volkswagen shares fell more than 1% after the announcement, continuing a downward trend that has seen their stock lose nearly 44% of its value over the past five years.

Financial analysts believe that the overhaul reflects broader challenges for the German economy. Daniel Schwarz, an analyst at Stifel, noted, “The plans go far beyond market expectations, highlighting tough realities for Germany’s auto sector.”

A Broader Economic Struggle

Volkswagen’s labor crisis underscores the broader economic pressures facing Germany, Europe’s industrial powerhouse. Economists forecast a second year of contraction for the German economy, driven by weakening demand in Europe and China. The government faces mounting pressure to respond, with Chancellor Olaf Scholz expected to address these issues at an upcoming business summit.

The German government is closely monitoring the situation. “The Chancellor’s position is clear,” a government spokesperson said, adding that “possible management missteps should not harm workers.” However, unions are prepared to resist, with IG Metall union negotiator Thorsten Groeger pledging a strong response if the automaker confirms its plans. “Strikes may be on the horizon come December,” Groeger warned.

Workers Fight to Protect Their Livelihoods

For many Volkswagen employees, the threat of job cuts feels personal. Blowing whistles and horns, workers rallied outside VW’s headquarters, determined to protect jobs. “This is about all our livelihoods,” said Stefan Erhardt, a worker in Kassel. “I’m scared. This isn’t just about VW—it’s about every small business in this town.”

VW is set to present concrete cost-reduction proposals on Wednesday when the company releases its third-quarter results. However, with emotions running high and a determination to protect jobs, it remains uncertain how VW’s management and its workforce will find common ground amid some of the most severe financial challenges the company has faced in recent years.

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