Marathon talks between Volkswagen and labour representatives about cost-cuttings measures at the carmaker ended in a breakthrough on Friday, with both sides portraying the deal as a win even though tens of thousands of jobs will eventually be shed.
While the IG Metall union said that the mass involuntary lay-offs and plant closures feared by employees have been averted, Volkswagen said its still plans to eliminate more than 35,000 jobs in a “socially responsible” manner by 2030 in order to regain its edge.
“We had three priorities in the negotiations: reducing excess capacity at the German sites, reducing labour costs and reducing development costs to a competitive level,” said VW brand boss Thomas Schäfer. “We have achieved viable solutions for all three issues.”
The carmaker will reduce technical capacity at its German sites by over 700,000 vehicles. “These are tough decisions, but also important decisions for the future,” he said.
IG Metall negotiator Thorsten Gröger acknowledged that some of the compromises agreed to were “painful,” including the elimination of tens of thousands of positions over a period of several years, but that nevertheless the worst outcomes had been prevented. That included 10% across-the-board wage cuts for the German workforce.
Volkswagen’s works council head Daniela Cavallo cast the deal in a positive light: “No site will be closed, no one will be laid off for operational reasons and our company collective agreement will be secured in the long term.”
According to her, the deal struck with management includes job security until the end of 2030, although some collective bargaining concessions were made when it came to compensation.
The negotiations over pay and job security have been taking place on and off for weeks. The latest round began on Monday at a hotel in the northern city of Hanover and lasted more than 70 hours.
According to IG Metall, the tough negotiations were the longest in Volkswagen’s history.
VW executives say that high labour costs in Germany are contributing to disappointing financial results at Europe’s largest carmaker, exacerbated by stiff competition in China and struggles with shifting to electric vehicles.
According to company executives, higher profit margins are needed to keep the core VW brand competitive and fund necessary investments.
As many as three of the 10 factories in Germany had been threatened with closure when negotiations began in September.
To put pressure on the company, IG Metall staged two days of factory strikes in December. According to the union, around 100,000 employees at nine locations took part in both strikes. It promised to stage even lengthier strikes in the new year if a deal was not struck before the Christmas holidays.