Volkswagen Could Close Three German Plants, Lay Off Thousands

The Volkswagen Group will significantly reduce the size of its manufacturing footprint in Germany, according to labor officials. VW is reportedly planning to close three plants and lay off tens of thousands of workers.

While nothing is official yet, top labor officials told Reuters that closing plants and laying off workers is part of an ongoing campaign to cut costs across the VW Group. The campaign is a big deal, too: Volkswagen stands proud as the biggest carmaker in Europe, and it has never closed a factory in its home country of Germany.

“Management is absolutely serious about all this. This is not saber-rattling in the collective bargaining round,” warned Daniela Cavallo, the head of Volkswagen’s works council, in a speech to employees. As of writing, there’s no word on which factories would close or precisely how many workers would get laid off.

Volkswagen operates 10 plants in Germany and employs approximately 300,000 people. The plants that remain open and the workers that keep their jobs will be affected by the cost-cutting measures as well, according to a separate report. The group will allegedly downsize the other factories, cut the rest of the workforce’s salary by 10 percent, and freeze wages in 2025 and 2026. It aims to save about €10 billion (roughly $10.8 billion USD) by 2026.

Thomas Schaefer, the head of the Volkswagen brand, has previously said that German factories aren’t productive enough and noted that they’re operating between 25 and 50 percent above targeted costs. In turn, this eats into the company’s profits. Analysts told Reuters that several external factors compound this problem, including increased competition from Chinese brands and a lack of demand for electric cars.

Volkswagen hasn’t commented on the report, and it hasn’t announced plant closures or layoffs yet. It will lay out its plans during a meeting scheduled for Wednesday, October 30, when it also announces its third-quarter financial results.