VW reaches union deal to cut 35,000 German jobs after tough talks By Reuters
Written by Christina Amann
HANOVER (Reuters) – Volkswagen on Friday announced drastic changes at its German operations, including more than 35,000 future job cuts and reduced job opportunities in an indefinite deal between Europe’s top carmakers and unions to avoid more strikes.
Union leaders hailed the deal as a “Christmas miracle” after 70 hours of tough negotiations, the longest in the company’s 87-year history. There won’t be any immediate closures or layoffs, and VW appears to have backed down from demanding a 10% wage cut.
A deal to avoid costly strikes could provide relief to investors after months of negotiations. Shares rose 2.4% in extended trading after the deal. They have lost 23% this year.
Volkswagen (ETR:) has been in talks with union representatives since September over measures it says are necessary to compete with cheaper Chinese rivals and deal with demand shortages in Europe and slower-than-expected adoption of electric cars.
About 100,000 workers have held two separate strikes in the past month, the largest in Volkswagen’s history, to protest cost-cutting plans.
“As a result of the agreed measures, the company has set a target for its future in terms of costs, capabilities and structures,” Volkswagen Group CEO Oliver Blume said in a statement.
“We are now back in a position to successfully shape our destiny.”
VW said the deal would allow savings of 15 billion euros ($15.6 billion) a year in the medium term and had no significant impact on its 2024 guidance. While there was no immediate closure, VW said it was looking at options for its Dresden plant and redeveloping the Osnabrueck site, including looking for a buyer. Some production will be transferred to Mexico.
Car production will be shut down at the Dresden plant by the end of 2025. VW AG employees will receive no pay increases under the collective wage agreement for the next four years, and some bonuses will be eliminated or reduced.
Production at VW’s Wolfsburg plant, the largest of them all, will be cut to two assembly lines from four.
“No place will be closed, no one will be laid off for work reasons and the salary agreement of our company will be held for a long time,” said Daniela Cavallo, the head of the labor council.
TALKING AT NIGHT
The fifth round of negotiations has been ongoing since Monday and continued late into the night in Hanover this week, with negotiators taking only short breaks to sleep and sip coffee, sausage and fruit.
The 35,000 job cuts in the future will represent about a quarter of VW’s workforce and coincide with a reduction in the company’s German plant network by more than 700,000 vehicles.
IG Metall’s chief negotiator, Thorsten Groeger, however, said the cuts, which will not include compulsory redundancies, are part of a solution to deal with overcapacity and will be carried out in a socially responsible manner.
Matthias Schmidt, an analyst of the European car market, said: “The reduction of 35K jobs in the human curve until 2030 is not enough and in the long run to deal with the current situation we see in the whole European market.”
He continued: “I would say the unions can take more from this than from VW but actually because of the complex nature of the company this is probably the best they could have hoped for.”
Top shareholder Porsche SE welcomed Friday’s deal as a “major improvement in Volkswagen’s competitiveness”, adding that it was now important to start the cuts.
CAMPAIGN ISSUE
These negotiations took place in a nondescript old hotel on the outskirts of Hanover, where delegates from both sides met in various rounds interrupted by breaks where they stocked up on coffee and fruit after midnight.
Some workers played a round of cards to get pressure.
The crisis at VW has struck at a time of uncertainty and political turmoil in Europe’s biggest economy, as well as turmoil among the region’s automakers.
The question of how to fix Germany’s sluggish growth has taken over as a campaign issue ahead of snap elections in February, with Chancellor Olaf Scholz, who is trailing in the polls, urging VW to keep all its factories open.
Scholz on Friday night accepted “a good solution, acceptable to society”, adding in a statement, “Despite all the difficulties, it ensures that Volkswagen and its employees can look forward to a bright future.”
Alexander Krueger, chief economist at Hauck Aufhaeuser Lampe Privatbank, said that at first glance it looks like the parties can live with each other.
“Other companies are making plans to cut jobs, VW seems to be the beginning,” he said. “Competitive pricing pressures will likely require further adjustments over time.”
Former Volkswagen executives, including Herbert Diess and Bernd Pischetsrieder, have failed in their efforts to make long-term changes at the Wolfsburg-based car company as unions have stood firm.
IG Metall’s threat of strikes was a powerful bargaining chip. UBS estimates that every day of the strike in Germany is likely to cost VW up to 100 million in cash and around 20 million in operating profit, based on the few 2,000-3,000 cars produced per day.
($1 = 0.9579 euros)
