The automotive giant will lay off tens of thousands of employees.

For a long time, the German automotive giant Volkswagen, which has been facing significant issues due to economic problems and strikes, announced yesterday that extensive changes will be made, including the layoff of more than 35,000 employees and capacity reductions, in a last-minute agreement reached with the union to prevent mass strikes.

Group CEO Oliver Blume stated, "The agreement reached after long and intense negotiations is an important signal for the future viability of the Volkswagen brand." In a statement from Volkswagen, it was noted that the agreement would provide annual savings of 15 billion Euros in the medium term and would not have a significant impact on the 2024 targets. It was also expressed that alternative options for the Dresden factory are being explored and that the Osnabrueck facility will be reused. Some of the production will be shifted to Mexico.

5% SALARY INCREASE SUSPENDED

The IG Metall Union announced that the 5% salary increase decided in November will be suspended and that vehicle production at the Dresden factory will be halted until the end of 2025. Daniela Cavallo, the chair of the works council, stated, "No facility will be closed, no one will be laid off for operational reasons, and our company wage agreement will be secured in the long term." Cavallo continued, "With this tripartite agreement, we have achieved a rock-solid solution under the most difficult economic conditions."

PRIME MINISTER ALSO WELCOMED IT POSITIVELY

The agreement between Europe’s largest car manufacturer and the unions was also positively received by German Chancellor Olaf Scholz. Scholz stated, "It is good news that the company and the unions have agreed on a good, socially acceptable solution today. The agreement allows Volkswagen and its employees to look forward to a good future with hope despite all the challenges," he expressed.

VOLKSWAGEN IS JUST THE BEGINNING

Alexander Krueger, Chief Economist at Hauck Aufhäuser Lampe based in Frankfurt, commented, "At first glance, it seems like a compromise that both sides can more or less accept. Other companies are also planning layoffs, and Volkswagen appears to be just the beginning."