VW reaches deal with German union, preventing layoffs and plant shutdowns

Volkswagen has reached a wage deal with union plant workers in Germany – averting more than 100,000 layoffs and plant closures as the automaker looks to cut production to increase its operating revenue. 

The deal, hammered out in bargain negotiations, aims to help VW meet industry challenges, including a drop in vehicle demand in Europe, a rise in raw material costs, and stiffer competition from Chinese car companies.

• The wage agreement involves 120,000 German auto workers and bars involuntary plant closures until 2030.

• It also includes provisions that enable VW to decrease its plant workforce by 35,000 jobs by 2030 through buyouts and early retirement.

• The union retreated from its demands for 7% wage increases and VW backed off its proposed 10% wage cuts as well.

• VW corporate employees won’t see any pay raises in the next four years under the new agreement, and some bonuses are being cut or reduced.

What they’re saying: “After long and intensive negotiations, the agreement is an important signal for the future viability of the Volkswagen brand,” group CEO Oliver Blume said in a statement.

Follow the money: VW expects the wage agreement to save the company $1.56 billion a year in labor costs and $4.17 billion annually by cutting its manufacturing capacity by more than 700,000 vehicles.

Between the lines: VW’s wage agreement with workers follows months of declining sales and operating revenue for the German automaker.

• As of early November, VW’s vehicle sales totaled 6.5 million units globally in 2024, a decline of 4% compared to the same period in 2023.    

• The automaker’s operating revenue dropped 21% ($3.6 billion) in the first nine months of 2024, compared to 2023 – from $17.6 billion to $14 billion.

• VW’s Q3 revenue dropped by 41.7% year over year, falling from $5.3 billion to $3 billion.       

Final note: The deal won’t evade some shifts in VW’s plant operations that are already in motion. A factory in Dresden is currently set to shutter its operations at the end of next year but will likely be repurposed for something else. And another plant in Osnabrueck that produces the subcompact crossover SUV, the T-Roc, will face uncertainty beyond 2027.

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