VW demands 10% wage cuts to save jobs as profits plunge

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Summary

  • Workers and management hold second round of talks
  • Volkswagen could shut plants for first time in Germany
  • Q3 profit drops 42%, lowest in three years
  • Hit by high costs, weak demand in China and Europe
  • Too early to decide on giving state aid, government says

WOLFSBURG, Germany, (Reuters) – Volkswagen asked its workers to take a 10% pay cut on Wednesday, arguing it was the only way that Europe’s biggest carmaker could save jobs and remain competitive as profits plunged to a three-year low and union bosses threatened strikes.

It was the first official confirmation of cost-cutting measures VW wants to implement to turn around its fortunes as high costs and weak demand in China dragged down sales and left its factories bloated from overcapacity.

The company did not address directly the issue of whether it planned to close factories in Germany for the first time in Volkswagen’s 87-year history, though labour representatives said that option remained on the table.

VW’s problems have fed wider anxieties about Germany’s status as an industrial powerhouse and the competitiveness of European carmakers against encroaching global rivals.

German automakers also fear the impact of a standoff between the European Union and Beijing, with EU tariffs of up to 45.3% on Chinese electric vehicles coming into force this week.

“We urgently need a reduction in labour costs in order to maintain our competitiveness. This requires a contribution from the workforce,” Arne Meiswinkel, the VW brand’s personnel chief who leads negotiations for the carmaker, said.

Volkswagen released its third-quarter results on the same day as the second round of what have been acrimonious talks between the company and unions over wages and its broader future.

The two sides agreed to keep talking and will meet again on Nov. 21.

For Volkswagen, the third-quarter results were further evidence that major change was needed to keep the company competitive.

But worker representatives accuse management of bungling decisions and tearing up a treasured consensus on decision-making. They came into talks demanding a 7% pay rise and threatened strikes from December unless the company definitively ruled out plant closures.

The stacked bar chart shows Volkswagen passenger car deliveries by region in the Jan. to Sept. period between 2019 and 2024.
The stacked bar chart shows Volkswagen passenger car deliveries by region in the Jan. to Sept. period between 2019 and 2024.
“From the company’s point of view, plant closures are still on the table, i.e. they have not been completely ruled out,” Volkswagen works council head Daniela Cavallo said.
($1 = 0.9234 euros)
The segment wise earnings chart for Volkswagen for each quater shows that the earnings from Automotive division is the lowest since June 2020.
The segment wise earnings chart for Volkswagen for each quater shows that the earnings from Automotive division is the lowest since June 2020.

Reporting by Christoph Steitz, Andrey Sychev, Christina Amann and Ilona Wissenbach; Additional reporting by Sumanta Sen and Andreas Rinke; Writing by Matthias Williams; Editing by Barbara Lewis and Jan Harvey