VW averts closures, announces workforce reductions

Volkswagen announced on Friday a comprehensive restructuring plan that includes 35,000 future job cuts and reduced production capacity in Germany. The agreement, reached after 70 hours of intense negotiations, averts immediate site closures and mass layoffs, ensuring a long-term collective wage agreement.

The deal, described as a “Christmas miracle” by union leaders, follows months of negotiations amid growing competition from Chinese automakers and slower-than-expected EV adoption in Europe. While no immediate plant closures were confirmed, vehicle production at the Dresden plant will cease by the end of 2025, with some operations shifting to Mexico.

Volkswagen CEO Oliver Blume stated the measures would save €15 billion annually, positioning the company to “successfully shape its own destiny.” Despite the job cuts—representing 25 per cent of its German workforce—Volkswagen pledged to carry out reductions in a “socially responsible manner,” without compulsory redundancies.

Investors reacted positively, with VW shares rising 2.4 per cent in extended trading. However, analysts like Matthias Schmidt noted that the cuts might be insufficient to address ongoing stagnation in Europe’s automotive market.

The crisis at Volkswagen comes amid Germany’s broader economic challenges, with Chancellor Olaf Scholz praising the deal as a “socially acceptable solution” ahead of February’s snap election.

Attribution: Reuters

Subediting: M. S. Salama