This article was just released by the NY Times about Volkswagen initiating layoffs and plant Closures in Germany.
One of the reasons cited was high energy and labor costs making their German plants non-competitive. The following line in italics is from the article.
The German economy, Europe’s largest, contracted in the months from April to June, shrinking 0.1 percent from a year earlier. The latest figures dampened hopes that the country might be pulling out of stagnation, which analysts say is driven by high energy and labor costs.
When energy costs go up, everything gets more expensive and labor costs have to go up with that, so energy costs can affect labor costs also.
Rich Ellenbogen
Volkswagen, Seeking to Cut Costs, Considers German Plant Closures
By Melissa Eddy
Sept. 2, 2024
Updated 2:29 p.m. ET
Volkswagen warned on Monday that it would consider closing factories in Germany for the first time in its 87-year history and end a decades-old guarantee of job security for workers, as it faces profitability problems amid increasing pressure from Asian competitors.
The company said in a statement that the measures were meant to shore up its namesake brand, but it declined to provide any details.
“In the current situation, even plant closures at vehicle production and component sites can no longer be ruled out without swift countermeasures,” the company said. “The situation is extremely tense and cannot be resolved through simple cost-cutting measures.”
IG Metall, the powerful union that represents German automotive workers, responded by saying it would fight any job cuts. It added that Volkswagen managers had told it that a cost-cutting plan announced last year was not working and that additional savings worth “billions” were needed. Volkswagen declined to confirm that number.
Last year, Volkswagen and worker representatives agreed to measures that would save the company 10 billion euros, or $11 billion, by 2026. But those plans, which included job cuts largely based on attrition, are no longer enough, the company said on Monday.
“The European automotive industry is in a very demanding and serious situation,” Oliver Blume, chief executive of Volkswagen, said in a statement. “Germany in particular as a manufacturing location is falling further behind in terms of competitiveness. In this environment, we as a company must now act decisively.”
The automaker owns 10 brands, including Audi, Porsche and Lamborghini, but its flagship brand remains core to its identity and that of Germany’s storied history as an automobile nation. But Volkswagen has faced falling sales, amid decreased demand in Europe, especially for its electric vehicles.
Volkswagen’s share of the Chinese market, its largest market, has shrunk as fast-moving domestic rivals roll out affordable electric cars. Despite plans by the European Union to introduce tariffs on imports of electric cars from China, those competitors are starting to expand into Europe.
The German economy, Europe’s largest, contracted in the months from April to June, shrinking 0.1 percent from a year earlier. The latest figures dampened hopes that the country might be pulling out of stagnation, which analysts say is driven by high energy and labor costs.
Shutdowns of Volkswagen’s German factories would be a first for the company, which was founded in Wolfsburg in 1937. But closing plants, as well as ending the agreement that provides workers with job guarantees through 2029, will face stiff opposition from union leaders and workers’ representatives, who hold half the seats on the company’s supervisory board.
Daniela Cavallo, a union leader and the head of the council representing Volkswagen workers, blamed company management for failing to develop a competent strategy and instead seeking to save by cutting jobs.
“We will fiercely defend ourselves against this,” Ms. Cavallo said in a statement. “There will be no plant closures with us.”
Clashes with unions have cost several chief executives at Volkswagen their jobs. Already the unions are gearing up for wage negotiations that are set to begin this fall. Nearly half of Volkswagen’s 650,000 workers around the globe are in Germany.
“The company — and the VW brand — are in a very dangerous situation,” said Ferdinand Dudenhöffer, director of the Center for Automotive Research in Gelsenkirchen, Germany.
Read complete article: https://www.nytimes.com/2024/09/02/business/volkswagen-germany-plant-closures.html