Volkswagen’s cuts are a symptom of Germany’s broader industrial decline

Volkswagen is considering closing four German factories and cutting up to 100,000 jobs, Reuters has reported. Amid soaring energy costs and competition from China, the company’s profits have plummeted in recent years.

Should the cuts go ahead, Volkswagen will close factories in Hanover, Zwickau, and Emden, as well as an Audi plant in Neckarsulm, Reuters reported on Friday, citing sources within the company. These closures would result in the loss of 45,000 jobs, on top of the 50,000 layoffs agreed upon with trade unions in 2024.

Volkswagen executives will discuss the cuts at a meeting next month. According to a separate report by Germany’s Manager Magazin, the company is also weighing a 15% cut in investment over the next five years.

A spokesperson for the world’s second-largest carmaker said that they would not comment on “confidential documents,” but admitted that “the entire group, including its brands and subsidiaries, must undergo far-reaching change.”

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Volkswagen employs more than 667,000 people worldwide, almost half of them in Germany. However, the company has been forced to scale back production at home since 2022, when Berlin’s decision to abandon Russian gas imports in favor of renewables and expensive American liquified natural gas (LNG) left the industry reeling from higher energy costs. The German economy has experienced two years of contraction followed by two years of sub-1% growth.

Volkswagen already closed one automobile assembly plant, in Dresden, last December – the first time it had closed a factory in Germany in its nine-decade history. BASF, Bosch, Continental, and more than a dozen other German manufacturers have closed one or more facilities over the last four years.

With energy costs eating into Volkswagen’s profits, the company’s electric vehicles are no longer able to compete with offerings from its Chinese rivals. Once the dominant automaker in China, Volkswagen now sells fewer vehicles there than domestic brands BYD and Geely. In Europe, BYD and fellow Chinese brands Chery, SAIC, and Leapmotor have all doubled their market share over the last year.

Back in Germany, Volkswagen’s internal union and the IG Metall metalworkers’ union have vowed to resist the job cuts. “Should such plans go ahead, we would do everything in our power to prevent them,” the organizations said in a joint statement on Friday.