As if Volkswagen didn’t have enough problems — the rise of Chinese EVs is considered to pose an existential threat to the world’s largest automaker — rotating two-hour strikes have early December hit nine German VW plants. Unionized workers are protesting, among other things, a proposed 10% wage cut put forth by the automaker amid ongoing labour negotiations. VW has also threatened to close German plants – those would be the first in the company’s 87-year history – along with mass layoffs.
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Just as the automaker began to recover from the Dieselgate scandal, a black eye on VW culminating in fraud and conspiracy charges filed in the U.S. against then-CEO Martin Winterkorn and a purported payout of some US$33.3 billion, Chinese electric vehicles started to arrive in Europe, priced far less than the domestic competition and cooling what to that point had been some decent growth for VW in the burgeoning sector.
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That declining demand, coupled with high production costs compared to Chinese automakers, has eaten into VW’s profits, and so the current labour negotiations are seeing the company seeking some compensation from the workforce.
Unsurprisingly, the VW unions are pushing back hard, with today’s two-hour strikes at factories in Wolfsburg, Hanover, and the EV-manufacturing plant in Zwickau signalling the first salvo after an agreement not to stage walkouts ended on Saturday.
The fourth round of negotiations is scheduled to begin on December 12, and the unions have said that if the company does not ease its demands, the work stoppages could escalate into 24-hour or unlimited stoppages unless a deal is struck in the next round of wage negotiations. Such closures will have a direct impact on Volkswagen’s output, which will only add to the automaker’s bottom-line woes.
“If need be, it will be the toughest collective bargaining battle Volkswagen has ever seen,” said union IG Metall’s lead negotiator Thorsten Gröger. “Volkswagen has set fire to our collective agreements.”
VW is Germany’s largest employer, counting some 120,000 personnel covered by a collective agreement, which includes workers at Audi and Porsche. The two sides remain far apart. Company officials contend a fundamental restructuring of the way it builds automobiles is essential, citing a falling demand for cars in Europe; and higher costs of labour, energy, and raw materials.
In response, the union and works council have devised a plan that would save an estimated €1.5 billion (CDN$2.2 billion) in labour costs without the need for factory closures. The plans include forfeiting future pay hikes in exchange for shorter working hours at some plants; and waiving bonuses for executives and staff.
The company has responded to that by saying the concessions are far too small, and would not contribute “to any long-term financial relief for the company in the coming years.”
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