In This Story
Volkswagen VWAGY-0.75%, one of the biggest carmakers in Germany, may do something it hasn’t done in its 87-year history: close plants in Germany.
The unprecedented move would set up an intense showdown between VW and powerful labor unions. The company said on Monday that in addition to potential closures, an attempt to end a 30-year-old job security pact with workers is on the table, Bloomberg reported.
“The economic environment has become even tougher and new players are pushing into Europe,” VW Chief Executive Officer Oliver Blume said in a statement that was cited by the publication. “Germany as a business location is falling further behind in terms of competitiveness.”
Part of those setbacks include an EV squeeze and a cutback in consumer spending. Logistics, energy, and labor costs are shrinking VW’s margin, which is currently sitting around 2.3%, down from 3.8% last year. VW is also underperforming in China just as China’s EVs are encroaching on Europe.
The European Union has responded by seeking tariffs aimed at stopping the “flood” of Chinese electric vehicles into Europe.
“As part of its ongoing investigation, the Commission has provisionally concluded that the battery electric vehicles value chain in China benefits from unfair subsidisation, which is causing a threat of economic injury to EU BEV producers,” the European Commission said in a June statement about the tariffs.
If VW moves forward with any closures, it’d be a huge test for the carmaker. The union presence at VW is massive. For one, half of the seats on its supervisory board are filled by labor representatives.
Will Gavin contributed to this article.
More on VW
Volkswagen is having a tough time
Rivian’s stock nudges up after getting the green light for its $5 billion Volkswagen deal