For First Time in 87 Years, Volkswagen May Close 3 Plants in Germany

The automaker’s top employee representative told workers that management planned to shutter the factories to cut costs amid slumping sales.

Volkswagen could shut down as many as three factories in Germany and lay off tens of thousands of workers as it seeks to regain its edge in Europe amid slumping sales and increased competition from China, the company’s top employee representative said Monday.

The closures would be the first in the 87-year history of the company, Germany’s largest employer, and would be a further blow to the country’s already stagnant economy.

The representative, Daniela Cavallo, who leads the council representing the company’s employees in Germany, told a gathering of workers at Volkswagen’s home plant in Wolfsburg that the proposed closures were part of a plan that managers had presented to the works council.

The company “wants to close at least three VW factories, downsize all remaining plants, divest itself of core areas and, on top of that, realize heavy pay cuts for the remaining employees,” she said.

Volkswagen is also considering cutting the work force at the plants in Germany that would remain open, Ms. Cavallo said, adding, “In concrete terms, this means taking out even more products, volumes, shifts and entire assembly lines far beyond to what we have already done.”

Volkswagen is the flagship brand of the Volkswagen Group, which also includes Audi and Porsche.

No other company in Germany carries the same weight as Volkswagen. Its history is intertwined with the country’s economic and industrial prowess of the post-World War II era, and local economies of entire regions across the country depend on Volkswagen and its well-paid workers.

Volkswagen declined to comment on the details of the plan, saying it would do so only once the company and employee representatives had agreed to a solution. But in a statement, managers said that because of shrinking demand and growing competition, employment costs in Germany remained too high and existing structures would have to change.

“Without comprehensive measures to regain competitiveness, we will not be able to afford significant investments in the future,” Gunnar Kilian, a member of the management board, said in the statement.

A spokesman for Olaf Scholz, Germany’s chancellor, suggested that “wrong management decisions” could be to blame for Volkswagen’s troubles, and said workers should not have to pay the price.

“The aim now is to maintain and secure jobs,” the spokesman, Wolfgang Büchner, told a regular briefing by government officials.

Mr. Scholz is under pressure to revive the flagging German economy, the largest in Europe, amid shrinking industrial output. The country is the only one of the world’s seven leading economies that the International Monetary Fund is projecting will stagnate this year. The German government said this month that it expected the economy to contract 0.2 percent in 2024, down from an earlier projection of 0.3 percent growth.

Volkswagen suggested last month that factory closures in Germany might be necessary for its flagship brand to remain relevant. Automobile manufacturing is Germany’s most important industry, contributing 564 billion euros, or $610 billion, to the country’s economy.

But it is also heavily dependent on exports, especially to China, where German manufacturers sold around 4.3 million cars in 2021, according to the German Association of the Automotive Industry, a trade group. In recent years, however, Chinese consumers have turned to domestically produced electric vehicles, causing demand for German vehicles to fall.

Since the pandemic, the demand for cars in Europe has also dropped by roughly 500,000, as Volkswagen leaders have repeatedly pointed out. From the management’s perspective, that number translates roughly to the output of two of Volkswagen’s 10 plants in Germany, said Arno Antlitz, Volkswagen’s chief financial officer.

“This is basically the magnitude of two factories,” he said. “This is where we stand, and we have to look at it.”

Volkswagen is also in wage negotiations with the IG Metall union, which represents most of the carmaker’s workers and is seeking a 7 percent pay increase. The two sides decided to open the talks over a new pay deal several months early because of the restructuring plans.

The next round is scheduled for Wednesday, and Ms. Cavallo called on the company to present employees with a plan. Her announcement two days before the talks added to the uncertainty among workers.

“My colleagues and I, we are worried about our jobs,” Britta John, a Volkswagen employee and spokeswoman for IG Metall in Braunschweig, told the German public broadcaster NDR. “The situation is really discouraging.”

Jack Ewing contributed reporting from New York.

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