Volkswagen’s plans to cut costs by €4bn sparks union backlash, threat of Strikes

Volkswagen AG plans to slash costs by €4 billion ($4.2 billion) in a bold restructuring move, its brand chief, Thomas Schaefer, has revealed. The carmaker faces tough choices, including potential layoffs and plant closures, as it battles high costs and weak European demand.

“Delaying restructuring until 2035 would spell disaster. We must act decisively within three to four years,” Schaefer said in an interview with Welt am Sonntag. He emphasized the need to tackle overcapacity head-on to secure Volkswagen’s future.

Volkswagen’s ongoing talks with unions have grown tense, with workers opposing factory closures and demanding alternatives to job cuts. However, Schaefer warned that early retirements and attrition alone won’t meet the cost-cutting targets.

The company has proposed a 10% wage reduction for employees at key units and highlighted that labor costs at German sites are twice as high as those at its plants in southern and eastern Europe.

Volkswagen has already reaped €7.5 billion in savings from previous efforts, but Schaefer stressed the urgency of further cuts to stay competitive. He admitted that the measures would likely extend to both vehicle and component production sites across Germany.

Unions, meanwhile, are threatening strikes starting in December if plant closures and sweeping layoffs are not ruled out. The outcome of these negotiations will shape Volkswagen’s ability to weather rising costs and stagnant demand in Europe.

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