By Christina Amann and Andrey Sychev
WOLFSBURG, Germany (Reuters) -Workers at Volkswagen threatened strikes on Wednesday unless management backed down from planned factory closures in Germany, spelling more trouble as profits at Europe’s biggest carmaker plunged to a three-year low.
Volkswagen released its third-quarter results on the same day as a second round of acrimonious talks between VW and unions over wages and fixing the company’s future, as high costs and weak demand in China dragged down sales.
VW’s problems have fed wider anxieties about Germany’s status as an industrial powerhouse and the competitiveness of European carmakers against encroaching global rivals.
German automakers also fear the impact of a standoff between the European Union and Beijing, with EU tariffs of up to 45.3% on Chinese electric vehicles coming into force this week.
For Volkswagen, the Q3 results were further evidence that major change was needed to keep the company competitive.
But worker representatives accuse management of bungling decisions and tearing up a treasured consensus on decision-making. While unions are demanding a 7% pay rise, they say VW plans to shut three plants on home soil for the first time in the company’s 87-year-history, as well as mass layoffs and 10% pay cuts for those who keep their jobs.
“And I say quite clearly that Volkswagen has opened Pandora’s box by terminating job security and other collective agreements, has jeopardised the trust of its employees and it is now up to Volkswagen to restore this trust,” IG Metall union negotiator Thorsten Groeger said.
Workers expected a future for all German sites in the restructuring.
“Otherwise, I can say quite clearly that we will have to plan further escalation with our negotiating and collective bargaining committee,” he told reporters.
Ahead of the talks, which take place at the stadium where the VfL Wolfsburg Bundesliga team plays its football, fretful employees and trainees left handwritten and typed letters on display on tables.
“The disappointment and the fear is great,” one wrote. “The family obviously doesn’t want me,” said another.
Volkswagen on Wednesday reported a 42% drop in third-quarter profit, its lowest level in three years.
“This highlights the urgent need for significant cost reductions and efficiency gains,” finance chief Arno Antlitz said in a statement.
Antlitz said he was confident that the company could reach an agreement with workers but could not rule out strikes, with the company considering more than 10 billion euros ($10.8 billion) in cost cuts.
He said there was a comeback plan for China that includes spruced up software and driving assistance, expecting to regain market share from 2026 or 2027.
The German government has been pushing for a solution that keeps VW’s plants open but a spokesperson on Wednesday said it was too early to decide whether Berlin would provide state aid.
SHRINKING SALES
The European car market has shrunk by about 2 million vehicles since the pandemic, resulting in about 500,000 fewer unit sales for Volkswagen annually. Cheaper models from Tesla and Chinese carmakers have gained market share in Europe.
“We stand for free and open markets, if you look at Chinese competitors, they already embarked to set up plants in Europe,” Antlitz said.
“We have not forgotten how to build great cars, but our production costs are far from competitive,” he said. “We should really use time to increase our competitiveness on German plants.”
In China, Volkswagen has also lost market share to cheaper models from local competitors, and the impact has been exacerbated by a wider slowdown in the Chinese economy due to a real estate crisis.
Volkswagen’s deliveries to China, the world’s biggest car market, fell by 15% to 711,500 vehicles in the third quarter. This dragged down the global figure, which dropped to 2.176 million vehicles. The 2024 dividend will also be lower.
Year-to-date, Volkswagen’s stock has lost about a fifth, underperforming a drop of 10% in the pan-European automotive index.
Volkswagen works council head Daniela Cavallo earlier this week threatened to break off talks.
Unions cannot hold wider strikes until December as part of a previously agreed truce, but labour leaders have repeatedly threatened that workers would do whatever is in their power to prevent what they consider to be a breaking of taboos.
Management says the German plants are far more expensive to operate than those of competitors because of high costs for workers and energy.
Antlitz said cuts would be hard, “and that many employees are worried about their future”.
“We are facing essential and painful decisions,” he said.
($1 = 0.9234 euros)
(Reporting by Christoph Steitz, Andrey Sychev, Christina Amann, Ilona Wissenbach; additional reporting by Sumanta Sen and Andreas Rinke; Writing by Matthias Williams; Editing by Barbara Lewis)
