Volkswagen may not close its Germany factories after all

A new Bloomberg report cites that Volkswagen may in fact be working on a deal to keep its factories in Germany open.

The report stated that the automaker is considering keeping its plants up and running while reinstating job security agreements until 2030, with the tradeoff being that workers would forgo bonus payments, according to an anonymous source.

Earlier this month, a hundred thousand workers walked off at nine Volkswagen factories across Germany, including its EV-only factory, bringing assembly lines to a grinding halt in the battle over the slashed pay, lost jobs, and the automaker’s future. The strike came after weeks of collective bargaining negotiations in which Volkswagen didn’t back down from its plan to potentially cut thousands of jobs and close factories in Germany – a first in the automaker’s 87-year history in the country. Volkswagen plans to close at least three factories, lay off thousands of workers, and trim pay for those remaining by 10%, all as it fights to stay alive amid stiff competition from China. Volkswagen announced that it would officially close its Audi plant in Brussels where it makes the Audi Q8 E-Tron.

Since, CEO Oliver Blume has been locked in an intense dispute with IG Metall, with management pushing for major cuts while workers are threatening more strikes if a fair deal isn’t met – but now there seems to be a small glimmer of hope.

Cost-cutting measures on the table include moving production of the Golf from Germany’s Wolfsburg factory to Mexico, and ending production of VW-branded electric vehicles in Zwickau to trim capacity, the report said.

Of course, Bloomberg noted that the details of the deal could change and the talks could still end up without an agreement, so Volkswagen and IG Metall are still on shaky ground. But an agreement would prevent massive walkouts, but the latest round of proposals certainly aren’t enough to pull VW out of its hole. The previous plan to lay off workers, cut wages, and close the three plants would have helped save €17 billion ($17.6 billion).

Bloomberg writes:

Employees foregoing bonus payments and VW reshuffling production won’t be sufficient to save an additional €4 billion annually, which management needs to bolster margins, UBS analyst Patrick Hummel said Thursday. “We’re not sure this is really the final package,” he told Bloomberg Television.

From the deal being discussed now, production of VW’s ID.3 hatchback and ID.4 SUV would end in Zwickau and shift to Wolfsburg and Emden.

This comes at a time when VW is radically restructuring its business to cut costs, while seeking to streamline production and development processes, shaving off months on the development cycles of specific projects to help tighten the belts, all while rethinking its EV retail model to stay more competitive. Volkswagen has been facing a steep decline in sales in China, which is its core market, while simultaneously facing challenges from BYD and other Chinese automakers entering the European market.

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