Volkswagen’s CEO Hails Deal to Cut Jobs Without Factory Closures

Volkswagen CEO Oliver Blume has praised a recent agreement to significantly reduce jobs and production capacity in Germany while avoiding factory closures. However, the car manufacturer’s shares dropped sharply on Monday, with a decline of over 3% in Frankfurt afternoon trading, making it the biggest faller on the DAX index.

Blume has described the deal as positive news for the company, explaining that it addresses overcapacity at Volkswagen’s German plants. He noted that the adjustments would allow the automaker to continue producing vehicles in Germany at competitive costs.

After protracted negotiations and two major strikes, Volkswagen reached an agreement on Friday to eliminate 35,000 jobs in Germany by 2030 as part of a cost-saving initiative expected to reduce annual expenditures by $4.2 billion. Despite the significant job cuts, the agreement steered clear of mandatory redundancies and a threatened closure of domestic factories, which unions had strongly opposed.

Blume acknowledged that, even without shutting down plants, the deal would lead to a reduction in production capacity by approximately 730,000 vehicles per year—equivalent to the output of two to three large facilities.

The automaker has faced mounting challenges, including increasing domestic costs, a slow transition to electric vehicles, and stiff competition in the Chinese market, particularly from local EV manufacturers. These difficulties have heavily impacted Volkswagen’s flagship VW brand, which has struggled with high manufacturing costs and insufficient profitability.

Volkswagen, which operates 10 brands ranging from Seat and Skoda to Porsche and Audi, first hinted at drastic measures in September when it revealed that it was considering closing German factories for the first time in its 87-year history. The announcement triggered mass strikes, with union IG Metall warning of an unprecedented wave of industrial action unless Volkswagen withdrew its most severe proposals.

As Germany grapples with economic difficulties, Blume joined calls for reforms to improve domestic business conditions. Ahead of the formation of a new government following February elections, he urged policymakers to reduce taxes, cut red tape, and lower energy costs. He emphasized the need for Germany to reinvigorate its economy, likening the situation to getting back on the fast track after years on the hard shoulder.

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