(Bloomberg) -- Volkswagen AG and unions started negotiations over wide-ranging cost cuts on Wednesday, with tensions between both sides higher than they’ve been in years.
The talks center on VW’s plan to potentially shutter factories in Germany for the first time after scrapping decades-old job protections earlier this month. The IG Metall union has vowed to fight those plans, threatening strikes that could paralyze Europe’s biggest carmaker for weeks.
“There will be no talks about factory closures and mass layoffs with us,” said Thorsten Gröger, the union’s lead negotiator. If VW sticks to its cutback plans, then “tens of thousands of colleagues will force the company back on the right track.”
The dispute is a major test for Chief Executive Officer Oliver Blume after union clashes felled a number of his predecessors. The CEO has warned that costs in Germany are too high as sales wane and Chinese manufacturers push into Europe. VW has also lost momentum in the key Asian market, where homegrown brands dominate on electric cars.
The first round of talks takes place in Hanover, where hundreds of union members gathered on Wednesday, many of them carrying flags and blowing whistles. Both sides’ are still far apart, with IG Metall demanding a 7% wage hike for industrial workers. Labor leaders have said that employees shouldn’t have to suffer for management blunders including VW’s poor performance in the US.
Blume’s main target is VW’s underperforming namesake passenger car brand, whose profit margins are getting squeezed amid a sputtering transition to EVs and a consumer spending slowdown.
VW could force through decisions on plant closures this year, paving the way for more than 15,000 job cuts, analysts at Jefferies said earlier this month. The carmaker is eyeing closing two to three facilities, with as many as five German sites under consideration, the analysts said.
Earlier this month, VW got a taste of the wrath triggered by its cutback plans, with thousands of workers shouting down managers at the Wolfsburg factory, Europe’s largest. Executives lamented flagging sales that have left it with about two plants too many.
Job cuts at VW 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 unions.
“Volkswagen needs solutions now,” Stephan Weil, Lower Saxony premier and a supervisory board member, said Wednesday in state parliament. Making the carmaker competitive “is the basis for long-term economic success and secure jobs.”
Strikes could start as soon as Dec. 1, when a grace period between VW and the union runs out.
(Updates with Lower Saxony premier comment in tenth paragraph.)
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