Volkswagen agrees deal to save German plant from closure

Volkswagen has reached an agreement with the IG Metall trade union that will protect plants in Germany from closure and immediate mandatory redundancies.

However, both parties have agreed to cut more than 35,000 jobs across the country by 2030 “in a socially responsible manner”, to save some €15bn (£12.4bn).

Germany’s biggest carmaker had earlier warned that it may have to close plants in the country for the first time to cut costs.

After lengthy talks that began in September, the union said Friday that the two had “succeeded in finding a solution” that secures jobs and enables future investment.

VW was considering closing three factories in Germany and calling on its workforce to accept a 10% pay cut.

At the time, the union was demanding a 7% raise.

While the deal will also reduce production capacity at its plants, it was celebrated by union leaders.

“No sites will be closed, no one will be laid off for operational reasons and our company’s wage settlement will be protected in the long term,” said Daniela Cavallo, works council head at IG Metall.

“We have achieved a concrete solution in the most difficult economic circumstances,” he said.

35,000 job cuts by 2030 are expected to be made through various solutions such as offering early retirement.

Under the agreement, the 5% wage increase previously agreed upon will also be suspended in 2025 and 2026.

The union said this would help “support change” at the company.

Germany will also reduce the number of apprenticeships offered each year from 1,400 to 600 from 2026, and it will consider relocating some production to Mexico.

It is also considering alternative options for its Dresden and Osnabruck sites.

But VW’s group chief executive Oliver Blume said in a statement that the deal was “an important signal for the future viability of the Volkswagen brand.”

The factory closure in Germany would have been unprecedented in the manufacturer’s history.

VW, along with other German carmakers, has been hit hard by a decline in demand for its cars in China, previously a lucrative market.

At the same time, Chinese brands are moving into Europe, increasing competition for sales.

During the negotiations, approximately 100,000 workers joined brief, so-called “warning strikes” at sites across the country to put pressure on the company’s management.

The latest round of talks began on Monday, with negotiators apparently determined to settle the matter before Christmas.

German Chancellor Olaf Scholz also welcomed the announcement, calling it a “good, socially acceptable solution”.