The German automotive industry has been in crisis for several years now. The situation at Volkswagen AG is precarious. The company collective agreement has been terminated and plant closures have been discussed.
Sales figures in the German automotive industry are falling, especially for electric vehicles. This is leading to shrinking profits. The Volkswagen Group suffered a sharp drop in profits in the third quarter of 2024. Competition from abroad is also having an impact on the tense situation in Germany. Not only VW, but also Ford is facing major challenges.
Reasons for the imbalance in the German automotive industry
In the third quarter of 2024, Volkswagen reported a 63 percent drop in profits. An operating profit of 1,3 billion euros is offset by a loss of almost five billion euros, which is due to development and investment costs. One reason for this imbalance is the situation in China as a sales market.
The largest Chinese manufacturer BYD has become the market leader and left the entire VW Group behind. Demand is particularly high for BYD's partially electric vehicles. Almost 90 percent of new VW registrations, on the other hand, have a combustion engine. Since the corona pandemic, VW has sold around two million fewer cars per year than before.
The situation is similar at Ford in Cologne, where large sums have been invested in e-mobility. The company is not making any money due to the low demand for electric vehicles and has already announced further job cuts. Michael Kellner, economic policy expert for the Green Party, speaks of management errors in light of the situation at VW.
VW held on to the old ways for too long and does not yet have any affordable electric cars on offer. Another reason for the current situation is the diesel scandal. Due to the emissions manipulation, VW suffered billions in damages. According to Kellner, the answer to this is the cooperation between management and the works council to get Europe's largest automobile company back on the right track.
The current situation at VW
At VW, there were discussions about closing at least three plants, massive job cuts and even wage cuts. At the start of the wage negotiations, no redundancies were planned. The job cuts were to be socially acceptable.
On 16 December 2024, the last round of wage negotiations at VWAfter a marathon of negotiations lasting more than 70 hours, VW and IG Metall agreed that there would be no redundancies or plant closures. The politicians are just as relieved as the VW employees.
According to its own statements, IG Metall has achieved a breakthrough in the wage dispute with VW. The collective bargaining parties agreed on a job guarantee until the end of 2030. VW will nevertheless cut over 30.000 jobs during this period, but the job cuts are to be carried out in a socially acceptable manner.
VW and IG Metall also agreed that there should be no wage increases until 2027. According to IG Metall, the employees' monthly salary will remain unaffected. Previously, VW demanded a flat-rate salary reduction of ten percent. However, the increased holiday pay that was previously paid will no longer apply.
Changes for the individual locations
Even if no plants are closed and there are no redundancies, VW is facing a challenge. In order to overcome this challenge and overcome the crisis, changes are planned for individual locations:
- Wolfsburg: Technical development is being reorganized in Wolfsburg. Around 2030 jobs will be cut by 4.000. Only the CUPRA born and ID.3 models will still be manufactured in Wolfsburg.
- Emden: The ID.7 Tourer, ID.7 Limousine and ID.4 models are manufactured in Emden after the facelift.
- Osnabrueck: The T-Roc Cabrio will be manufactured in Osnabrück until mid-2027. Options for other uses of the site are being examined.
- Zwickau: The Audi Q4 e-tron and the Audi Q4 e-tron Sportback will continue to be built in Zwickau. Vehicle production will focus on one line from 2027. New business areas are to be developed as part of the circular economy.
- Dresden: Vehicle production at the Transparent Factory in Dresden will cease at the end of 2025. Volkswagen is working on alternatives, including VW's participation in a third-party concept.
Even if there are no factory closures and the associated mass layoffs, the result of the collective bargaining negotiations is not yet a reason to celebrate, according to Stephan Weil (SPD), the Prime Minister of Lower Saxony. Even if the job cuts are carried out in a socially acceptable manner, a clear majority of them are affected in Lower Saxony.
Impact of possible factory closures on industry and cities
As a result of the collective bargaining negotiations, factory closures were prevented. However, the future of the Dresden site is questionable. Plant closures would have far-reaching regional consequencesThe closure of just one plant could result in tens of thousands of employees losing their jobs.
VW is a major employer at all locations. Therefore, many other livelihoods are also at risk. This affects numerous suppliers, but also transport companies. Many positions at the suppliers would also be affected by a closure.
Even companies and industries that seem to have nothing to do with the automotive industry, such as service providers, retail and the catering industry, are affected. Former employees are short of money. This also affects cities and municipalities, as they collect less tax.
There is no money for investments in infrastructure and social projects. Development in the region is stagnating. The population could migrate. Image and video credits/source: VW/Ford/Dalle-E etc.