Volkswagen AG plans to close at least 3 German factories, lay off tens of thousands of employees, and reduce salaries for all staff by 10%

Volkswagen, which is in dire straits, is fighting for survival.

On Monday local time, Daniela Cavallo, the chairwoman of Volkswagen's labor union, spoke in Wolfsburg, Germany, stating that Volkswagen plans to close at least three German factories, lay off tens of thousands of employees, and downsize the remaining factories in Europe.

If her words come true, this will mark the first time in its 87-year history that Volkswagen has closed factories in Germany. Volkswagen has ten core factories in Germany, but Cavallo did not specify which factories would be affected.

Cavallo also mentioned that while laying off employees, Volkswagen will also cut the salaries of all staff by 10%, with 300,000 employees in Germany. She explained that there will be two rounds of salary "freezes" in the future, so there will be no salary increases in 2025 and 2026.

According to Cavallo, Volkswagen also hopes to divest its entire local assembly department and transfer the work overseas or outsource it to external service providers.

As Europe's largest carmaker, Volkswagen has been facing difficulties in recent months like other European carmakers. Volkswagen previously warned that due to intense competition in the Chinese market, slowing sales in other major markets, and high costs of transitioning to electric vehicles, the group needs to take aggressive self-rescue actions.

In the past three months, Volkswagen has issued profit warnings twice, attributing them to a "challenging market environment." The Volkswagen Group is expected to announce its latest quarterly performance on Wednesday, with the operating profit margin for 2024 currently forecasted at 5.6%, lower than the previous forecast of 6.5%-7%.

Cavallo told hundreds of employees in Wolfsburg on Monday that senior executives have two days to change their minds, otherwise the union will organize workers to strike.

She said Volkswagen CEO Oliver Blume is "taking a huge risk... we will break off negotiations and do what needs to be done when employees are worried about their survival."

According to the Financial Times on Monday, Volkswagen responded by stating that it would not comment on "speculation about confidential negotiations with the IG Metall union and the works council" and added that the company is at a "critical moment."

For weeks, Volkswagen has been negotiating with the union on reform and cost-cutting plans, and in September, it first mentioned considering closing German factories. However, analysts have been skeptical due to strong opposition from the political sphere and the works council.

Lower Saxony is an important shareholder of Volkswagen, controlling 20% of the voting rights, and has previously stated that its priority is to maintain jobs and often stands with the union.

The union is further pressuring the German government to take action to address the ongoing economic weakness. Cavallo stated that Germany urgently needs to develop an industrial master plan to ensure that it does not "slide into decline."