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Olaf Scholz's Government is facing economic turbulence, not least when it comes to Volkswagen (Image: GETTY)
Volkswagen has warned it will need to make significant cost reductions after reporting a steep decline in third-quarter earnings on Wednesday.
And the gloomy prognosis has prompted one union chief to issue a warning about possible industrial action as he urged the company to outline a "comprehensive future strategy”.
Meanwhile the country’s beleaguered government is apparently at loggerheads when it comes to how best to drag Europe’s biggest economy out of the doldrums.
The latest announcement comes days after the German car manufacturing giant said it was considering the closure of some of its factories in what would be a first in its history.
The company posted a net profit of £1.37 billion (€1.58 billion) for the July to September period, marking a 64% drop from the £3.77 billion (€4.35 billion) reported for the same period last year. Revenue fell 0.5% to £67.86 billion (€78.49 billion).
Volkswagen AG workers rally at headquarters over cost-cutting push (Image: Getty)
The announcement followed comments two days earlier by the head of Volkswagen’s works council, who indicated that management had informed employee representatives of plans to close at least three plants in Germany. Volkswagen has yet to disclose any further details publicly.
In early September, Volkswagen said challenging conditions in the automotive sector could necessitate plant closures within Germany and could mean withdrawing a longstanding job protection agreement, in place since 1994, which was intended to prevent layoffs until 2029.
Volkswagen blamed factors such as the entry of new competitors into European markets and Germany’s declining appeal as a manufacturing base. European automakers are under increasing pressure from cheaper Chinese electric vehicles.
The latest results “demonstrate the urgent need for action in a volatile environment characterised by intense competition,” said Chief Financial Officer Arno Antlitz.
There is currently a no-strike agreement - but this expires on December 1 (Image: Getty)
He added: “This is why we are facing important and painful decisions that we need to make and endure together.”
“We have not forgotten how to build excellent cars, but the costs - especially in our German plants and operations - are far from competitive.
“Therefore, the status quo cannot continue.”
Due to the confidential nature of ongoing discussions with employee representatives, Mr Antlitz declined to comment on specific plans or “speculations.”
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Volkswagen is considering the closure of several factories (Image: Getty)
Also today, Volkswagen held a second round of discussions at its Wolfsburg headquarters with union and employee representatives.
The head of the employee council, Daniela Cavallo, emphasised that workers expect a “comprehensive future strategy” that addresses more than just labour and plant costs.
Thorsten Groger, regional head of the IG Metall industrial union, said: “We expect the company today to at least commit to entering a negotiation process with us aimed at finding alternatives to plant closures and redundancies.”
He added that this commitment is “a precondition for continuing these negotiations.”
Mr Groger also pointed out that a no-strike clause from Volkswagen’s last wage agreement will expire on December 1.
Volkswagen employs approximately 120,000 people across its 10 German plants, six of which are in the northern state of Lower Saxony, including the main plant in Wolfsburg.
Speaking last week, Finance Minister Christian Lindner said of Germany’s economic woes: “There's no shortage of ideas.
"What there is a shortage of at present is agreement in the governing coalition.”
Clemens Fuest, the head of the Ifo economic think-tank, told ZDF television: “Each party is going its own way - you get the impression they’re already in election campaign mode.
“If that’s the case, if the chancellor can’t manage to get the government to pull together, then they should actually end the coalition."
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