German carmaker Volkswagen CEO Thomas Schaefer said the automotive giant sees no alternative to layoffs and plant closures to achieve a cost reduction of €4bn ($4.16bn), reported Reuters.
This move comes amidst conflict with the company’s unions, which have threatened strikes starting from December 2024.
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The unions have sought solutions from the company in ongoing negotiations over pay and capacity that do not involve factory closures or significant job cuts.
Schaefer was quoted by the news agency as saying to weekly Welt am Sonntag: “Ultimately, any solution must reduce both overcapacity and costs. We can’t just stick a band-aid on it and keep dragging it along. That would come back to bite us later in a serious way.”
Schaefer has indicated that the majority of the proposed job reductions could occur through natural attrition and early retirement schemes.
However, he acknowledged that these measures alone would not suffice to address the company’s financial challenges.
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By GlobalData“It would simply take too long. There is no point in delaying restructuring until 2035. By then, our competition would have left us behind,” Schaefer added.
He noted that the company’s restructuring should instead be done within a period of three to four years.
Furthermore, the company proposed a 10% wage reduction for workers at the VW AG unit, which is currently at the centre of the dispute.
Schaefer said there is little hope for a significant recovery in the near future for demand in Europe.
He also pointed out that labour costs at Volkswagen’s sites in Germany are about twice as high as those at competitors and VW’s own locations in southern and eastern Europe.
Despite ongoing savings efforts that have positively impacted profits by about €7.5bn, Schaefer emphasised the need for an additional €4bn in savings.
The CEO has stated that the company sees no possibility of avoiding the closure of plants in Germany. The possible closures refer to vehicle manufacturing facilities and component production sites.
Last week, Reuters reported that Volkswagen‘s workers union proposed $1.6bn in cost savings, contingent on avoiding plant closures in Germany.
