By By Axel Schmidt and Christoph Steitz
WOLFSBURG, Germany (Reuters) -Volkswagen plans to shut at least three factories in Germany, lay off tens of thousands of staff and shrink its remaining plants in Europe’s biggest economy as it plots a deeper-than-expected overhaul, the carmaker’s works council head said.
Europe’s biggest carmaker has been negotiating for weeks with unions over its plans to revamp its business and lower costs, including considering plant closures in Germany for the first time.
“Management is absolutely serious about all this. This is not sabre-rattling in the collective bargaining round,” Daniela Cavallo, Volkswagen (ETR:VOWG_p)’s works council head, told several hundreds of employees at the carmaker’s biggest plant, in Wolfsburg, on Monday.
“This is the plan of Germany’s largest industrial group to start the sell-off in its home country of Germany,” Cavallo added, not specifying which plants would be affected or how many of Volkswagen Group’s roughly 300,000 staff in Germany could be laid off.
The comments mark a major escalation of a conflict between Volkswagen’s workers and the group’s management, which is under severe pressure to cut costs and remain competitive in light of weaker demand in China and Europe.
They also heap further pressure on the German government to act on persistent weakness of its economy, which faces a second successive year of contraction and has Chancellor Olaf Scholz’s coalition searching for ways to spur growth. Scholz trails in the polls with federal elections due next year.
Cavallo said Berlin needed to urgently come up with a masterplan for German industry to ensure it does not “go down the drain”.
A government spokesperson said Berlin was aware of Volkswagen’s difficulties and remained in close dialogue with the company and worker representatives.
“The chancellor’s position on this is clear, however, namely that possible wrong management decisions from the past must not be to the detriment of employees. The aim now is to maintain and secure jobs,” the spokesperson told a regular briefing.
Cavallo said there was agreement between workers and the board regarding the nature of the problems the carmaker, and many of its European peers, faces, ranging from a slower-than-expected electric transition to fierce competition from Chinese carmakers entering Europe.
“We are not far apart when it comes to analysing the problems. But we are miles apart on the answers to them,” he said.
Monday’s announcement follows more bad news for German carmakers last week, with Mercedes-Benz (OTC:MBGAF) vowing to step up cost-cutting measures after its earnings shrank.
Porsche, which is majority-owned by Volkswagen, meanwhile said it was paring back its dealership network in China to reflect weak demand in the world’s largest auto market, also flagging billions of euros in cost cuts.
German carmakers also fear being caught in the crosshairs of a trade war between the European Union and China, with hefty EU tariffs on Chinese electric vehicles set to come into force this week.