Volkswagen and IG Metall Reach Agreement to Secure German Jobs Amid Economic Challenges

Following negotiations, Volkswagen and IG Metall have reached an agreement that aims to avert immediate redundancies and secure jobs while implementing a job reduction strategy by 2030. This comes amid rising competition and declining demand, particularly from the Chinese market.

Volkswagen (VW) has successfully negotiated with the IG Metall trade union to avoid the closing of its facilities in Germany, successfully sidestepping immediate compulsory layoffs. As part of the agreement, both parties have consented to a strategy that will lead to over 35,000 job reductions throughout the country by 2030 in what is termed a "socially responsible manner," with aims to save approximately €15 billion (£12.4 billion).

The negotiations had commenced in September, with VW earlier indicating potential plant shutdowns as a cost-cutting measure. The trade union reported progress after a series of discussions, emphasizing a compromise that retains jobs and allows for future investments. Initially, VW had contemplated shutting down up to three factories and requested that its workforce accept a 10% pay cut, while IG Metall sought a 7% wage increase. Ultimately, both sides found common ground.

The arrangement signifies a capacity reduction at VW plants while preserving jobs, celebrated by IG Metall leaders as a win. Daniela Cavallo, chief of the works council at IG Metall, stated, "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." She expressed satisfaction with what has been termed a "rock-solid solution" under challenging economic conditions.

The planned cuts of 35,000 positions are expected to be achieved through various measures, including early retirement options. In addition, a previously scheduled 5% wage increase will be postponed until 2025 and 2026 to help facilitate the company's transformation efforts. The number of apprenticeships will also decrease significantly, dropping from 1,400 to 600 annually starting in 2026, with discussions on relocating some production to Mexico.

Oliver Blume, group CEO of VW, characterized the agreement as "an important signal for the future viability of the Volkswagen brand," highlighting the unprecedented nature of potential factory closures in the company's history. The automotive industry, particularly in Germany, has been grappling with a resurgence in competition and a downturn in demand, particularly in markets like China.

Throughout the negotiation process, about 100,000 VW workers engaged in short "warning strikes" across various sites, exerting pressure on management. The final round of discussions began on a Monday, with both parties eager to finalize terms before the holiday season. The German Chancellor, Olaf Scholz, praised the agreement as a "good, socially acceptable solution" for the workers and the industry.