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VW Weighs Cutting 15,000 Staff on Plant Closures, Jefferies Says

Employees fit a bumper to a Volkswagen AG VW ID.3 car on the assembly line at the Volkswagen Sachsen GmbH plant in Zwickau, Germany, on Wednesday, May 24, 2023. Auto sales in Europe rose in April for a ninth month as supply chains improved and carmakers worked through backlogs of orders. (Krisztian Bocsi/Bloomberg)

(Bloomberg) -- Volkswagen AG could force through decisions on plant closures this year, paving the way for more than 15,000 job cuts, according to analysts at Jefferies.

The automaker could shutter production facilities without needing approval from the supervisory board, leading to possible provisions of as much as €4 billion ($4.4 billion) in the fourth quarter, Jefferies said Monday, citing comments from VW executives. The board has in the past blocked management’s restructuring efforts.

“Unions should feel pressure to reach new agreements while VW will be in position to force layoffs,” the analysts said in a note that cited comments VW made during a roadshow in North America. “There is risk of plant disruption, but unions can only strike on pay, not plant closure or layoffs if the latter are not contractually protected.”

A spokesperson for Volkswagen declined to comment.

The German manufacturer is struggling with high costs and tougher competition from Tesla Inc. and Chinese carmakers led by BYD Co. Earlier this month, the company scrapped three-decades-old job protections in Germany following a warning it may have to shutter plants in Europe’s biggest economy for the first time.

The decision to end job security agreements sets VW up for lengthy clashes with labor representatives. Cutbacks at the Wolfsburg-based manufacturer are harder to push through than elsewhere. Half the seats on its supervisory board are held by labor representatives, and the German state of Lower Saxony — which owns a 20% stake — often sides with trade union bodies.

VW is considering closing two to three facilities, with as many as five German sites considered, Jefferies said. VW managers told the analysts they have no backup plan if talks with unions to improve competitiveness fail.

--With assistance from Monica Raymunt.

©2024 Bloomberg L.P.