Volkswagen seals Union deal to avoid strikes, cuts 35,000 jobs

Volkswagen (VW) has struck a major agreement with unions to slash 35,000 jobs across its German operations, aiming to save €15 billion annually while avoiding immediate layoffs or factory closures. The deal, reached after 70 hours of marathon negotiations, was described as a “Christmas miracle” by union leaders.

“This agreement secures the future of Volkswagen while protecting workers’ rights,” said Daniela Cavallo, VW works council chief. “No one will be laid off for operational reasons, and our company wage agreement remains intact.”

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Shares of VW rose 2.4% after the announcement, offering some relief to investors. However, the automaker’s stock is still down 23% this year, reflecting challenges from European market stagnation and competition from cheaper Chinese rivals.

Sweeping Changes to German Plants

The agreement includes halving production lines at VW’s Wolfsburg plant from four to two and shutting vehicle production at Dresden by the end of 2025. Some operations will shift to Mexico, and options for repurposing the Osnabrück site, potentially with a new buyer, are under review.

Volkswagen CEO Oliver Blume emphasized the importance of the changes: “With this package, we are set to shape our own destiny and ensure competitiveness.”

Socially Responsible Cuts

The job reductions, representing about 25% of VW’s German workforce, will unfold gradually through 2030 without compulsory redundancies. Thorsten Groeger, IG Metall’s chief negotiator, called the plan a “socially responsible solution” to address overcapacity.

Political Implications

The deal comes amid broader economic and political challenges in Germany, with Chancellor Olaf Scholz praising the outcome as a “good, socially acceptable solution” that secures jobs and the company’s future.

The crisis at VW has highlighted Germany’s sluggish economic growth, a key issue ahead of February’s snap elections. “Competitive price pressures will likely require further adjustments,” said Alexander Krueger, chief economist at Hauck Aufhäuser Lampe Privatbank.

Avoiding Strikes, For Now

The agreement averts further costly strikes after two large protests in recent months, involving over 100,000 workers. UBS estimated each strike day cost VW €100 million in revenue.

VW’s top shareholder, Porsche SE, welcomed the deal as a “significant improvement in Volkswagen’s competitiveness,” urging swift implementation of the planned cuts.

As Europe’s largest carmaker navigates market pressures and a sluggish transition to electric vehicles, this deal may offer temporary stability. However, many believe more sweeping changes are inevitable.