Volkswagen Ends Longstanding Job Guarantees, Opening Door for Layoffs – Reuters

By Victoria Waldersee

FRANKFURT – Volkswagen announced on Tuesday that it is terminating a series of labor agreements, including job guarantees for six German plants that were set to last until 2029. This decision raises the possibility of layoffs starting next year, a move that worker representatives have vowed to oppose.

As Europe’s leading automaker, Volkswagen’s cancellation of long-standing employment guarantees is a part of a broader cost-cutting strategy as the company seeks to remain competitive against lower-priced Asian competitors.

This development follows Volkswagen’s warning that it might close plants in Germany for the first time in its 87-year history, a prospect that has sparked significant concern within the global automotive industry and elicited high-level reactions from the German government.

Gunnar Kilian, Volkswagen’s Labor Director, stated, "We must enable Volkswagen AG to reduce costs in Germany to a competitive level in order to invest in new technologies and products using our own resources."

To address uncertainty regarding labor agreements, Kilian indicated that Volkswagen is willing to expedite wage negotiations. Originally scheduled to begin in mid-to-late October, with potential strikes from late November, the works council is advocating for the discussions to commence this month.

The head of the company’s works council has pledged strong resistance against job cuts and factory closures, attributing the company’s challenges to management’s decisions. The IG Metall union has also suggested the possibility of implementing a four-day work week as an alternative to closures, reminiscent of a previous cost-saving measure taken in the 1990s.

Volkswagen’s current difficulties are set against a backdrop of economic uncertainty, characterized by sluggish growth, rising energy prices, and concerns about trade relations with the vital Chinese market, all of which are challenging Germany’s traditional industrial relations model.

If the two sides fail to reach an agreement by June of next year, labor agreements that were in effect before 1994 will automatically resume, leading to a potential pay increase for workers at the affected six plants. Prior agreements included additional pay elements such as a Christmas bonus, extra holiday pay, and higher overtime bonuses.

However, for the first time in decades, layoffs for operational reasons may become possible. The works council expressed that a mutually negotiated compromise is essential. Without one, Volkswagen could move forward with forced redundancies by the summer of 2025, subsequently imposing significant cost increases on remaining employees.