Volkswagen Terminates Labor Agreement Amid Restructuring Plans

Volkswagen Ends Labor Agreement Amid Restructuring Plans

In a significant move that has sent ripples through the automotive industry, Volkswagen informed union leaders on Tuesday that it would be terminating a longstanding labor agreement designed to protect workers from layoffs. This announcement comes just a week after the automaker revealed that it is contemplating the closure of factories in Germany, driven by declining sales and escalating operational costs.

Last week, Volkswagen warned that a restructuring of its flagship brand was essential to maintain competitiveness, particularly in light of dwindling demand in Europe and increasing competition from manufacturers in China. Among the potential measures being considered are the closure of one or two assembly plants in Germany, marking a historic first for the 87-year-old company.

In an official statement, Volkswagen emphasized that abandoning the job security agreement, along with several other labor contracts, was a necessary step to secure the company’s future. Gunnar Kilian, Volkswagen’s head of human resources and labor relations, stated, “We must position Volkswagen to reduce costs in Germany to a competitive level, enabling us to invest in new technologies and products using our own resources.”

The job security clause in the labor agreement, established between Volkswagen and the union IG Metall in 1994, had safeguarded workers from layoffs until 2029. Volkswagen confirmed that this clause would remain in effect until the end of this year, with potential layoffs being possible no earlier than June 2025.

Daniela Cavallo, the chair of Volkswagen’s works council and a member of IG Metall, asserted that the union would vigorously oppose the termination of the labor agreement. “We will mount a fierce resistance against this unprecedented assault on our jobs,” Ms. Cavallo declared. “With our collective efforts, there will be no layoffs.”

In addition to the termination of the job security agreement, Volkswagen announced the discontinuation of other labor contracts. This includes an agreement that mandated the company to offer permanent positions to all vocational trainees and apprentices, as well as a deal that provided temporary employees with wages exceeding the standard rates in the automotive sector.

Approximately half of Volkswagen’s 650,000 employees worldwide are located in Germany. The company and the union are expected to commence negotiations on a new wage agreement this fall. The union is advocating for a 7 percent pay increase alongside additional demands aimed at preventing plant closures.

Volkswagen Group, which encompasses ten brands including Porsche and Audi, also conveyed last week to union representatives at a plant in Brussels that it would not continue the production of its Q8 model beyond 2025. If new models are not identified, the plant faces potential closure, resulting in the loss of approximately 3,000 jobs.