Volkswagen Planning To Close Factories In Germany For First Time, Find Out Why

Speaking to the employees on Wednesday, CEO Oliver Blume said that the firm must end its job protection pledge, taken three decades ago that barred layoffs till 2029

German automaker, Volkswagen, is planning to shut down factories in its home country. This will be the first time in the firm’s 87-year history that it will close operations in the country, however, it is taking the decision to cut down on operating costs and remain competitive, the company added.

The automaker has been experiencing some difficulties recently and this decision comes as a worry not only for its workers but has also generated concern amongst the German politicians, reported Associated Press.

Diminishing Domestic Market

Speaking to the employees on Wednesday, CEO Oliver Blume said that the firm must end its job protection pledge, taken three decades ago that barred layoffs till 2029. The management of the firm stated that core brand of the firm needs to reach €10 billion in cost savings by 2026 as the company now has greater factory capacity than its requirements and the car market in Europe has grown smaller than before the COVID-19 pandemic.

The firm noted that maintaining underused assembly lines is an expensive task. Europeans are purchasing nearly 2 million cars lesser per year than they before the 2019, when sales hit 15.7 million. 

Since the firm controls almost a quarter of the domestic market in Europe, it means, ‘we are short of 500,000 cars, the equivalent of around two plants, said Chief Financial Officer Arno Antlitz while speaking to the firm’s employees. “And that has nothing to do with our products or poor sales performance. The market simply is no longer there,” the CFO said.

Cutting Costs

Meanwhile, the operating profit of the Volkswagen Group slipped to €10.1 billion euros in the first of the year, falling 11 per cent from the same period last year. The luxury brands in the group, such as Porsche, Lamborghini, and Audi reported better sales in comparison to Volkswagen models.

Volkswagen operates 10 assembly and parts plants in Germany, with a workforce of 120,000 out of its global employee count of 684,000. The firm has never closed any Germany factory before.

The focus for a reduction in costs is on the core brand of the group and its workers in Gemany. This is majorly because the Volkswagen passenger car division in the country accounted for the majority of €1 billion that were set aside for job buyouts and restructuring costs.

Car loan Information: