“We are not operating in a fantasy world.”
Volkswagen Group CEO Oliver Blume faced down tens of thousands of striking workers at its Wolfsburg, Germany headquarters Wednesday, as the automaker contends with a massive nine-plant strike amid weeks of collective bargaining friction between labor union representatives and management. The company plans to shut down factories in its home country and lay off thousands of workers, which is a first in the company’s 87-year history. It also aimed to cut pay for remaining workers by 10%, and did not back off any of these ambitions in its most recent labor negotiations, triggering more than 100,000 workers to temporarily bring production lines to a halt in protest.
For its part, Volkswagen says it needs to drastically cut costs to cope with weaker demand and stiffer competition from China.
“As management we are not operating in a fantasy world,” Blume told disgruntled employees. “We are making decisions in a rapidly changing environment.” He further stated that pricing pressure is “immense” in China, which is VW’s biggest external market. German labor costs are also far higher than Chinese labor costs, prompting Blume’s statement that, “We therefore urgently need to take measures to secure the future of Volkswagen. Our plans for this are on the table.”
As of 2023, German auto workers earn wages that are roughly 8 to 18 times higher than the Chinese workers. A report from data site Statista shows hourly wages in Germany at 33.05 Euros (or $34.69 per hour), while a Reuters analysis of 30 Chinese firms put worker hourly rates between 14 yuan ($1.93) and 31 yuan ($4.27) per hour.
Volkswagen workers in Wolfsburg participated in a two-hour strike during their shifts beginning on Monday, as an agreement not to stage walkouts ended Saturday. Workers also picketed other major plants including Zwickau, which manufactures the company’s EVs for several markets outside China and the U.S.
IG Metall, Germany’s largest trade union representing automakers across the nation’s car companies, including Volkswagen Group, will continue its negotiations with VW executives on December 9. If those discussions fail to produce results, the strike could widen and escalate to 24-hour work stoppages, further reducing the automaker’s output and operating margins.
“How long and how intensive this confrontation needs to be is Volkswagen’s responsibility at the negotiating table,” IG Metall union representative and lead negotiator Thorsten Groeger said. “Anyone who ignores the workforce is playing with fire — and we know how to turn sparks into flames.”
While the strike is stalling Volkswagen’s current production in Europe, it has not impacted manufacturing operations in the United States. The United Auto Workers (UAW) union were successful in unionizing VW’s only stateside plant in Chattanooga, Tennessee. However, workers at the plant have not gone on strike against the automaker.
The strike comes at a time of crisis within the auto industry at-large.
Sticking with Volkswagen, the company’s U.S. CEO Pablo Di Si stepped down late last week, abruptly resigning after just two years in the post. Stellantis CEO Carlos Tavares also abruptly resigned from his position Sunday.
Nissan is currently in deep financial trouble, with a senior official telling Financial Times it has “12 to 14 months to survive”, and supposedly seeking an “anchor investor”. While Mitsubishi reduced its shares in the automakers, rumors currently suggest Honda may pick up some of the slack through buying shares in Nissan. Honda and Nissan announced a partnership in August, and have stepped up talks in the past few months to co-develop EV technologies, as they too face pressure from Chinese rivals.
