Plant Closures, Layoffs Can’t Be Avoided

It looks like Volkswagen Group is headed for a historic closure of plants in Germany. VW Brand CEO Thomas Schaefer believes it will take three to four years for the company to restructure, and that can’t happen without some significant cuts.

The CEO recently spoke with the German publication Welt am Sonntag, delivering a straightforward message: VW needs to reduce capacities “and adapt to the new realities.” Schaefer went on to say that, as of now, the company doesn’t see any way to reach its goals without closing at least one factory.

There are two German factories currently under consideration for closure. Volkswagen’s large facility in Osnabruck manufactures the Porsche 718 Cayman and Boxster, two vehicles that end production next year. Osnabruck also builds the Volkswagen T-Roc Cabriolet, and like the Porsche twins, its production run ends in 2025. The second facility is the Transparent Factory in Dresden, a much smaller location that builds the ID.3. It’s a low-volume plant that supplements primary ID.3 production at Zwickau.

Layoffs could accompany plant closures, too. Schaefer told Welt am Sonntag that employee attrition through normal means and early retirement packages won’t be enough to turn things around. Those who remain—including executives and board members—will almost certainly face salary cuts. According to Reuters, Executive Board salaries have already been reduced by five percent since the beginning of the year.

In its 87-year history, VW has never closed a factory in its home market of Germany. From the first mention of the possibility, local unions and leaders of VW’s works council—a group of employees that bridge the gap between union and company leaders—have pushed hard to avoid any closures. That includes going on strike in December should the automaker follow through on shutting down one or more facilities.