Volkswagen's Strategic Shift Amid Economic Pressures

Volkswagen plans to shut three German factories, lay off thousands, and downsize other plants in response to rising costs and productivity challenges. The move seeks to tackle competitiveness issues amid tough market conditions, with potential employee strikes looming as unions and management clash over proposed measures.

Volkswagen has announced plans to close three of its factories in Germany, leading to significant layoffs as part of a major restructuring effort. The carmaker aims to address high production costs and competitiveness issues, as rising expenses threaten its profitability, according to the company's works council head.

CEO Thomas Schaefer stated that Volkswagen is not generating sufficient income from its cars while contending with escalating energy, materials, and personnel costs. Schaefer emphasized the need for productivity improvements at German sites, highlighting that factory expenses are currently 25-50% higher than anticipated. He noted that Volkswagen still handles several internal tasks that competitors have already outsourced more cost-effectively.

The German government expressed concern about the potential impact on employees, urging the preservation of jobs. Analysts have observed that the cost-cutting measures go beyond market expectations, citing various challenges such as competition in China and softening European demand for battery electric vehicles. Labor unions are expected to oppose the measures, raising the possibility of strikes.

(With inputs from agencies.)