Volkswagen deal cutting 35,000 German jobs is ‘good news,’ CEO says

German carmaker Volkswagen’s deal with unions — that would see 35,000 future job cuts in Germany — is “good news” for the company, its CEO said Sunday.

The decision is part of a series of significant changes to Volkswagen’s German operations, including substantial capacity reductions, agreed between the manufacturer and workers’ unions Friday in a last-ditch agreement to prevent widespread strikes.

The deal came after months of tension with workers, sparked by the carmaker’s threat to close plants in Germany for the first time in its 87-year history and cut pay — a plan that led some 100,000 Volkswagen workers to go on strike at the company’s German plants in early December.

“The agreement is good news for Volkswagen,” Volkswagen Group CEO Oliver Blume said in an interview with Frankfurter Allgemeine on Sunday.

“With this package of measures, we are setting a decisive course for the future,” he said, adding that by reducing overcapacity at German sites, the company will be able to manufacture vehicles at competitive costs.

“It is the basis for us to be an economical and reliable employer for many thousands of people in the long term,” he added.

His words echoed Volkswagen’s statement on Friday. “After intensive negotiations with [union] IG Metall and the works council, Volkswagen AG has agreed on a joint agreement ‘Future of Volkswagen,’” the company said.

“In this way, the company and the works council will work together to ensure the long-term success of Volkswagen AG,” the statement continued.

The deal was reached after more than 70 hours of negotiation talks, the longest in the company’s 87-year history, with union leaders hailing the agreement as a “Christmas miracle.”

Volkswagen said the deal would allow savings of €15 billion annually in the medium term and saw no significant impact on its 2024 guidance.

While there were no immediate closures, the company said it was looking into options for its Dresden plant and repurposing the Osnabrück site, including looking for a buyer. Some production would be relocated to Mexico.

“No site will be closed, no one will be laid off for operational reasons and our company wage agreement will be secured for the long term,” said works council chief Daniela Cavallo.

Süddeutsche Zeitung however reported Sunday that around 4,000 Volkswagen managers will face income reductions under the agreement.

Starting in 2025 and 2026, their salaries will decrease by 10 percent compared with current levels. The reduction will gradually lessen in the following years, with this adjustment remaining in place until 2030.

Volkswagen has been in talks with unions since September about steps needed to compete with cheaper Chinese rivals, tackle weak demand in Europe, and deal with slower-than-expected growth in electric vehicle sales.

In late October, the company announced for the first time its intention to close at least three plants in Germany and downsize all remaining factories.

Tommaso Lecca contributed reporting.