Volkswagen has held a meeting with its domestic workforce to explain that it may be forced to shutter factories on its home turf. The closures would be the first ever in Germany in the auto giant’s nearly 90-year history.
About 25,000 people attended the gathering on Wednesday at Volkswagen’s headquarters in Wolfsburg.
The company’s chief financial officer, Arno Antlitz, told the meeting said that Volkswagen is facing a shortfall in demand of around 500,000 units, the equivalent of the output of two plants.
Volkswagen has faced stiff competition from Chinese low-priced electric vehicles. It unveiled cost-cutting plans on Monday. The firm said it could no longer rule out closing plants in Germany and terminating labor agreements guaranteeing employment.
If Volkswagen goes ahead with plant closures, they would be the first in the company’s home country since its foundation in 1937.
Employees voiced opposition to the prospect of closures. Volkswagen employee representative, Daniela Cavallo said “The board has repeatedly talked about the Volkswagen Family. That meant no one should be left behind.”
Volkswagen has been shifting its focus to the production of electric vehicles. In 2021, the company announced plans to have electric vehicles account for at least 70 percent of its unit sales in Europe by 2030.
But Volkswagen faces increasingly fierce competition in the EV market. As Chinese manufacturers increase their global EV sales, they are also making inroads into Germany, Europe’s largest auto market.
Sales of electric vehicles by the Volkswagen Group was 317,200 units from January to June this year, down 1.4 percent from the same period last year. The group’s EV sales in Europe fell 15.2 percent.
Volkswagen’s overall sales, including gasoline vehicles, are also on the decline, partly due to a drop in the Chinese market as the country’s economy slows down.
A rise in labor costs is also posing a challenge. Volkswagen’s net income for January to June this year was down about 14 percent from the same period the previous year.