By Anthony Marcus, correspondent. Eurasia Business News, September 3, 2024. Article no.1207

The deterioration of the economic situation in Germany leads to a decrease in the profitability of production.

Volkswagen AG is considering the unprecedented step of closing factories in Germany as part of a cost-cutting initiative. This move is driven by increased competition, particularly from Asian manufacturers, and the need to remain competitive in the electric vehicle market.

Volkswagen is considering closing factories in Germany. This is reported by Bloomberg with reference to the automaker.

The head of Volkswagen’s working council, Daniela Cavallo, said that the company’s main brand, which produces the Golf and Tiguan models, threatens to become unprofitable. The company plans to close at least one large car plant and one component plant in Germany.

The company is also trying to terminate the agreement with trade unions to preserve jobs until 2029, if approved, these will be the first closures of car factories in Germany in the entire 87-year history of the company.

“The economic situation has become even tougher, and new players are coming to Europe. Germany as a business location is increasingly lagging behind in terms of competitiveness,” said Volkswagen CEO Oliver Blume.

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Bloomberg notes that such a labor conflict will be a serious test for the CEO, who also heads the Porsche sports car brand. Conflicts with unions have affected several of his predecessors at Volkswagen. The company is trying to cut costs on its eponymous passenger brand, where profit figures have long lagged behind the norm, and these efforts have become increasingly difficult amid a slowdown in the transition to electric vehicles and slowing consumer spending.

According to the publication, Volkswagen employs about 650,000 employees worldwide, almost 300,000 of them in Germany. Half of the seats on the supervisory board of the company are occupied by representatives of trade unions, and the German state of Lower Saxony, which owns 20% of the shares, often takes the side of trade union organizations.

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Previous conflicts between the brand and unions have led to the end or reduction of the terms of office of top managers, including former CEO Bernd Pischesrieder, former Volkswagen brand boss Wolfgang Bernhard and Herbert Diess – Blume’s predecessor as CEO. All three tried to achieve efficiency gains, especially at Volkswagen’s domestic German facilities.

In July, it became known that the former plant of the German concern Volkswagen in Russian city Kaluga, now owned by the AGR company of the ex-president of Avilon Andrey Pavlovich, resumed serial production of cars after negotiations with a new partner.

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© Copyright 2024 – Eurasia Business News. Article No. 1207.