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▲ Volkswagen
Volkswagen Group, the German automaker, is pushing forward with what would be the largest restructuring in the history of the industry.
However, it remains unclear whether the management's plan will proceed as intended, as labor unions are fiercely opposing the cost-cutting measures, which include massive layoffs and factory closures.
The Volkswagen Group supervisory board began discussions on July 9 (local time) regarding the cost-cutting proposals presented by CEO Oliver Blume.
According to the business magazine Manager Magazin and the weekly newspaper Der Spiegel, CEO Blume has devised a plan to cut 100,000 jobs—15 percent of the company's 657,000 global workforce—and close four additional factories in Germany.
The daily newspaper Bild reported on the same day that the layoff target is actually 120,000, rather than the 100,000 previously reported.
The company has remained silent regarding the specific details of the restructuring plan.
Previously, management had reached an agreement with the labor union to cut 35,000 jobs in Germany and cease production at two German plants by 2024.
Since then, the layoff target was increased to 50,000.
This latest plan, which doubles that figure, represents the largest scale in the history of the automotive industry, surpassing the 74,000 job cuts by General Motors (GM) in 1991.
Management reportedly plans to phase out production by 2034 at plants in Zwickau, Emden, and Hanover, as well as the Audi plant in Neckarsulm.
Approximately 40,000 employees work at these four facilities alone.
The company plans to sell the facilities to defense contractors and utilize plants in Eastern Europe, where labor costs are lower, for vehicle production.
Management is also reported to have proposed a plan to reduce annual investment from the current 180 billion euros (310 trillion won) to 135 billion euros (233 trillion won) by 2031.
Der Spiegel reported that the goal of these cost-cutting measures is to boost the operating profit margin, which fell to 3.3 percent in the first quarter of this year, to 9 percent by 2030.
Along with this restructuring, Volkswagen Group also plans to significantly reduce its production capacity and model lineup.
The strategy is to overhaul the production network, including lowering global production capacity to the 9 million-unit level, in consideration of the rapidly changing market environment and competitive landscape.
As of 2019, Volkswagen Group's global production capacity reached 12 million units, but it had already reduced capacity by approximately 1 million units each in China and Europe during the COVID-19 pandemic.
For its model lineup, the company has decided to focus on core segments and gradually reduce the number of models by up to 50 percent.
Volkswagen Group explained, "Through this, we can reduce product complexity by up to 75 percent," adding, "We plan to concentrate secured investment and development resources on products and technologies that provide the greatest added value to customers and contribute most to the group."
The labor union, which had agreed to restructuring two years ago, strongly protested the announcement of the record-breaking layoffs.
IG Metall, the industrial union to which Volkswagen workers belong, held protest rallies on July 9 at 12 Volkswagen sites, including the headquarters in Wolfsburg, Lower Saxony, where the board meeting was taking place.
Thorsten Kruger, district manager of IG Metall for Lower Saxony and Saxony-Anhalt, warned the company that it would "have to face unprecedented large-scale labor disputes."
Local media outlets predicted that there is almost no chance the restructuring plan will pass the board of directors without a compromise with the union.
It is rare for the Volkswagen supervisory board, composed of 10 shareholder representatives and 10 labor representatives, to make decisions by a vote without consensus, and with one shareholder representative seat currently vacant, the management would be at a disadvantage even if a vote were held.
The so-called Volkswagen Law, enacted during privatization in 1960, stipulates that major decisions such as factory relocations and new construction require the consent of two-thirds of the supervisory board.
The state government of Lower Saxony, which holds a 20 percent stake in the group and possesses veto power, is also opposing the job cuts, recently proposing joint production with a Chinese company.
Management is reportedly even considering a plan to separate the core Volkswagen brand into a distinct subsidiary, similar to Porsche, in order to circumvent the Volkswagen Law.
(Photo: Getty Images Korea)
※ Please note: This article was translated by AI and may contain errors.
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