‘Major conflict’: Union rings warning bells as Volkswagen eyes job cuts

Herzogenaurach, Germany - June 23, 2018: A Volkswagen Golf GTE is charged at a charging station. The charging plug is plugged into the socket hidden behind the brand logo.

Volkswagen workers staged protests nationwide Thursday as unions warned of “major conflict” if the struggling German car giant pushes ahead with what could be the global auto industry’s biggest restructuring.

Europe’s largest carmaker has come under intense pressure from US tariffs, slimmer profit margins from electric cars and above all intense competition in China, the world’s largest auto market.

Thousands of job cuts have already been announced, but reports say CEO Oliver Blume is now weighing ramping these up to 100,000 as well as potentially closing four factories in Germany.

As VW’s bosses presented their planned overhaul to the 10-brand group’s supervisory board, workers staged protests outside plants and unions warned they were ready to step up industrial action.

“Whoever takes on the workers is risking a major conflict,” Thorsten Groeger, an official from union IG Metall, told reporters at VW’s headquarters in the city of Wolfsburg.

“We will not stand by and do nothing if the company does not change course”.

At one of the factories said to be earmarked for closure in Zwickau, eastern Germany, about 200 workers joined a demonstration, according to AFP journalists.

“This site will not be closed, not against our will -- we will defend it,” union official Thomas Knabel told the crowd, who waved banners that read: “United, fighting for our future”.

‘Demand is collapsing’

Denny -- who gave only one name, and works for a company that supplies the factory -- told AFP that “the region is dead if VW leaves”.

It was “entirely realistic” that the plant could close, the 48-year-old added.

“Demand is collapsing, other brands are coming that are cheaper, Chinese brands are coming.”

VW, whose brands range from mass-market Seats to premium Porsches, has already announced plans to axe up to 50,000 jobs in Germany, including 35,000 at its namesake marque.

These cuts were part of a deal agreed with unions at the end of 2024, which also ruled out plant closures in Germany until at least the end of the decade.

But the outlook has since worsened considerably, VW’s bosses say, prompting them to seek far deeper cuts.

If the new plans are ultimately pushed through, it would amount to a roughly 15-percent reduction in VW’s global workforce of some 630,000.

This would eclipse all other major job-cutting drives in the auto industry, notably Detroit-based General Motors’s move to cut almost 50,000 jobs in 2009 as it declared bankruptcy.

The whole German auto industry -- including VW’s peers BMW and Mercedes-Benz with their suppliers -- has been struggling in recent years, with job cuts and overhauls increasingly common.

Tricky overhaul

It could be tricky to push through such a sweeping overhaul at VW, however.

Ordinarily the supervisory board’s 20 members are split evenly between worker and shareholder representatives but, due to a recent departure, the labour side currently have a majority.

The 89-year-old group also has a complex ownership model that complicates overhauls.

The state of Lower Saxony -- home to Wolfsburg and six VW plants -- holds a substantial stake that gives it the power to block decisions.

No major announcement is expected after Thursday’s meeting, which is likely the start of a lengthy process of negotiation, several sources close to the matter told AFP.

While refusing to give details, a VW spokesman said previously the group needed to “improve its competitiveness” and apply “even more rigorous cost and investment discipline”.

Higher US tariffs on cars and auto parts introduced last year are expected to cost VW five billion euros ($5.7 billion) annually, with the situation particularly acute at Audi and Porsche, which have no US factories.

VW is also being elbowed out of China, with years of declining sales amid stiff local competition last year leaving the firm’s vehicle deliveries in the country at their lowest level since 2011.

“Our business model of past decades no longer works”, Blume said in March in a letter to shareholders.

He pointed to “regional market conditions, changes in trade policy, massive regulatory requirements in the various regions of the world and our high-cost position, above all in Europe”.