Volkswagen Considers Factory Closures In Germany For The First Time (Image: X @VW)
The renowned German automaker Volkswagen is shutting down its first-ever car factory in Germany as a part of a broader cost-cutting strategy. This may impact its significant workforce in the country as it is halting for the first time in its 87-year history. The current move has been linked to the company’s plan as it slowly transforms into electric vehicles (EVs). According to the reports, the company confronted a huge decline in consumer demand has also pushed Volkswagen to adapt to this transition.
The company has already slashed its administrative personnel costs by 20% as it implemented a €10 billion cost reduction plan since last year. The new cost-reduction strategy could lead to the dismissal of the existing agreement with labourers as the company offered job security till the year 2029.
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The current challenges to existing in a competitive pace combating the new entrants along with the struggling German manufacturing sector further attribute the sudden need to restructure the company, said Volkswagen CEO Oliver Blume. He also raised concerns that the country declined competitiveness in the era as a major manufacturing hub.
“The economic environment has become even tougher and new players are pushing into Europe,” he said. It is indispensable to take wise actions in the company and to react decisively to keep pace in the race, he added.
Despite its current plight, Volkswagen has maintained its leadership as in 2023, it has garnered a revenue of $348 billion delivering 9.24 million vehicles and has secured its top place in the Fortune Global 500 list. Nonetheless, the company has jinxed in dealing with consumer sentiments and has fallen flat in generating the profit margin.
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On the other hand, the company has addressed the issues of the employees and has adopted strategies including early retirement benefits, the highest payscale and limited access to Tarif Plus. However, the ongoing plans to reduce the workforce will completely hinge on CEO Blume’s discussion and further negotiations with the employee council.
