Volkswagen, Europe's largest carmaker, is facing inevitable changes that include the closure of several plants in Germany, the reduction of thousands of employees and the restructuring of other production sites. The measures announced by Volkswagen's management come in response to rising costs, falling demand and fierce competition, particularly from Asia. In addition, the move raises questions about the future of German industry and calls on the government to find ways to boost economic growth.

Volkswagen $VWA.BR has been in talks with unions for several weeks about sweeping measures to restructure its production in Germany, one of its key markets. Daniela Cavallo, chairwoman of Volkswagen's works council, said thecompany plans to close at least three plants in Germany and further cut production at other factories, putting thousands of jobs at risk. Cavallo stressed that the move cannot be seen as a negotiating tactic - it is a genuine plan to hedge the company against falling demand and high costs.

The situation is serious. Volkswagen is not only facing high energy and labour costs, but also weakening demand for electric cars in Europe and China. Volkswagen's German factories are running 25-50% above their costs compared to competitors, which is unsustainable in the long term, according to brand boss Thomas Schaefer. Schaefer said that if the competitiveness of the plants is not improved, their future will be threatened and with it investment in new technologies and the development of electric mobility.

Escalating conflict with unions

The works council, led by Daniela Cavallo, has threatened to break off negotiations unless management compromises on curbing redundancies and other measures. Strikes, which were being considered for early December, are now highly likely. At the same time, Cavallo called on the German government to support domestic industry and prevent widespread layoffs.

Analysts say Volkswagen's approach reflects a combination of several adverse factors - competition from China, falling demand for electric cars that is not meeting expectations, and regulations that are driving up costs. Volkswagen has lost 44% of its value over the past five years, a marked difference from the performance of other European car concerns such as Stellantis.

The role of government and the future of German industry

This situation comes at a time when the German economy is close to recession and Olaf Scholz's government is looking for ways to boost growth. Government representatives said they were aware of the situation and planned further discussions with Volkswagen and union representatives. "We need to protect jobs while finding a long-term sustainable solution for German industry," said a government spokesman.

But the problems facing Volkswagen are not unique to the carmaker. Other German concerns, such as Mercedes-Benz and Porsche, have also already announced measures to cut costs and reduce their operations in China due to lower demand. In addition, the possible trade conflict between the EU and China, which could affect the prices of Chinese electric cars on the European market, is also a cause for concern.

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Source: Yahoo Finance.