Major decision from the automotive giant! Closing a factory for the first time.

In recent years, the emergence of groundbreaking technologies in the automotive industry from China and the US has been a topic of debate in the European public opinion, while Volkswagen announced that it will close some of its factories in Germany, which provide employment for 300,000 people. Volkswagen stated that restructuring alone is not sufficient to improve the company's competitiveness in the short term and that the closure of vehicle and component production facilities is inevitable. The German manufacturer, which announced the termination of job security, had previously stated that all measures in this regard would be evaluated with the Workers' Council.



German car manufacturers have faced inflationary pressures, high energy costs, slow economic growth in Europe, rising far-right movements, and competition from Chinese car manufacturers as well as Tesla. The transition to electric vehicles continues to be challenging for Germany's automotive sector due to various regulations and raw material supply in the country and the European Union (EU). The sector is struggling with increased costs while making significant investments in battery technology.



Volkswagen, one of the largest companies in the world, announced that it is considering closing some of its factories in Germany, which provide employment for approximately 300,000 people, as part of its cost-saving and cost-cutting measures of around 10 billion euros. German automotive suppliers such as Bosch and Continental, as well as other European automakers, have also resorted to laying off tens of thousands of people due to both declining margins and demand, but Volkswagen, which signed a job security agreement in 1994, has not been able to reduce employment.



Oliver Blume, the CEO of Volkswagen Group, had planned to reduce personnel expenses by one-fifth until 2026 as part of cost-saving and cost-cutting measures after taking office two years ago. However, after failing to achieve the target of 3 billion euros in savings in two years, Blume pressed the button to do more last week. Blume announced the plan to consider closing the company's factories in Germany for the first time in its 87-year history by canceling the 30-year job security guarantee.



Following the announcement of the plan, Volkswagen management started negotiations with employees and representatives. However, worker unions and the works council stated that the closure of factories is unacceptable. The meeting between Volkswagen management and workers for the company's plans started last week with banners protesting the company's latest austerity plans.



Employees accused the management board of applying "double standards" with banners saying "We are Volkswagen - you are not" and "Keep your hands off job security." In addition, the state of Lower Saxony, which has 20% voting rights in the works council and prioritizes employment, opposes the closure of the facilities. The state government, which is a Volkswagen shareholder, does not want the factories to be closed.



German automakers announced that they will invest more than 200 billion euros in electric vehicles after the debate in the German public opinion about groundbreaking technologies in the automotive industry coming from China and the US. The German automotive sector accounts for 5% of the total value added in the country. 3% of employment in the country is provided by the automotive sector. According to the Economic Research Institute (Ifo) based in Munich, 70% of cars produced in Germany are exported to the UK, France, Italy, Spain, and the US. In addition, China has become an important export country for German manufacturers in recent years with its market size.



The crisis at Volkswagen also drew attention as it caused the German government, which ended the electric vehicle subsidy at the end of last year, to announce potential new tax incentives for battery-powered vehicles. According to the draft law prepared by the German government after ending the incentives for the green transformation of electric vehicles last year, companies will be able to deduct up to 40% of the value of newly purchased electric and zero-emission vehicles from tax invoices.



The comprehensive cost-saving plans announced by Volkswagen Group have worried the European Commission. Former EU Commissioner for Internal Market and Industry Thierry Breton expressed his concern in an interview with the German Handelsblatt newspaper, saying, "The announcements about factory closures are very worrying." Breton stated that the situation in the sector is not "rosy" and that it makes no sense to cover it up, attributing the crisis in the automotive sector to the failure of European manufacturers to convince their customers about electromobility.



According to the news published by the German weekly "Kfz-betrieb," Volkswagen Group has significantly increased the prices of almost all car models with internal combustion engines, referring to a letter sent to German dealers by the company based in Wolfsburg. The highest increase was seen in the newly facelifted Touareg SUV with an increase of about 2,500 euros, while the lowest increase was 500 euros in Taigo and T-Cross models. The price of the best-selling Golf and Tiguan increased by approximately 1,100 euros.



Automotive expert Prof.Dr. Ferdinand Dudenhöffer evaluated Volkswagen's decisions.

Emphasizing that Volkswagen is strongly connected to Lower Saxony, Dudenhöffer stated that the brand needs to create a new strategy by opening factories to international markets to eliminate this connection.

Dudenhöffer said about the crisis at Volkswagen, "If you look at the Skoda brand, you will see that Volkswagen is successful in vehicle production. So it's not about products or technology. This crisis is a result of the structure of the laws in Germany."

CHINESE MANUFACTURERS HAVE COST ADVANTAGE

Dudenhöffer explained that German automotive manufacturers have strong plans to produce electric vehicles, but emphasized that these plans cannot be realized due to political reasons.

"COOPERATION WITH CHINA IS NECESSARY TO BE STRONG"

Dudenhöffer emphasized that automotive manufacturers in Europe need to cooperate more with China in order to compete and stay strong, and stated the following: