Volkswagen scraps decades-old job guarantees, paving way for lay-offs

2:46 am Wednesday, September 11th, 2024

By Victoria Waldersee

FRANKFURT (Reuters) -Volkswagen said on Tuesday it was scrapping a range of labour agreements including a guarantee of jobs until 2029 at six German plants, raising the prospect of redundancies from next year that worker representatives have vowed to resist.

Europe’s top carmaker is cancelling the decades-old employment guarantees as part of a cost-cutting drive that has triggered a showdown with workers as Volkswagen struggles to compete against cheaper Asian rivals.

Volkswagen’s move follows a threat that it could shut plants on German soil for the first time in its 87-year history, which sent shockwaves through the global autos sector and prompted high-level German government concern.

“We must enable Volkswagen AG to reduce costs in Germany to a competitive level in order to invest in new technologies and new products with our own resources,” the company’s Labour Director Gunnar Kilian said in a statement.

In a bid to counteract uncertainty around labour agreements, Kilian said Volkswagen was offering to bring forward wage negotiations.

Such talks were due to start in mid- to late October, with strikes possible from the end of November, but the works council has called for the talks to start this month.

The head of the company’s works council has promised fierce resistance against lay-offs and factory closures, blaming management for Volkswagen’s ills.

The IG Metall union had previously said it could consider moving to a four-day week as an alternative to closures – replicating an earlier cost-cutting drive in the 1990s.

Volkswagen’s troubles come at a time of economic uncertainty, with weak growth, higher energy prices and questions over trade ties with the lucrative Chinese market testing Germany’s model for consensual industrial relations.

If the two parties do not reach an agreement by next June, labour agreements in place prior to 1994 will come into force – which, in what works council chief Daniela Cavallo described in a statement for workers as a “crazy-sounding consequence” – would result in a pay rise for staff at the six plants.

Additional pay components in the labour agreement before 1994 included a Christmas bonus, additional holiday pay, and higher bonuses for overtime, according to an article published in the works council’s internal newspaper.

However, layoffs for operational reasons would also be possible for the first time in decades.

“A negotiated compromise is actually needed. Otherwise, VW will be able to push ahead with forced redundancies from summer 2025, but at the same time would immediately face enormous cost increases for all those who remain,” the works council said in its article.

(Reporting by Victoria Waldersee, Writing by Matthias Williams; Editing by Miranda Murray, Alexander Smith and Emelia Sithole-Matarise)