VW Employees Concede Big Wage Cuts Are Needed To Keep Factories Open

Employee leadership at VW claims labor costs are only a small portion of the total cuts VW needs to make.

Photo by: Volkswagen

By: Christopher Smith

Nov 20, 2024 at 11:00am ET

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Volkswagen Group's crisis in Europe could result in several manufacturing plants shutting down, but VW's works council thinks that can be avoided. The employee-led group recently proposed a sweeping cut in wages across blue-collar and white-collar jobs. Works council leader Daniela Cavallo believes this would be enough to avoid mass layoffs and the potential closure of VW factories in Germany.

Cavallo presented this information during a press conference ahead of renewed negotiations with VW management, reports Automotive News Europe. The cuts would include wage reductions as well as suspended bonuses for pretty much everyone at the company, including executives and board members. Cavallo stated that labor costs are actually just a small portion of the $18 billion VW management is seeking to save.

The proposal comes amid news that VW's labor costs are considerably higher than those incurred by other German automakers. Documents obtained by Reuters show 15.4 percent of VW's revenue is spent on labor in Germany, compared to a range of 9.5 to 11 percent for Stellantis, BMW, and Mercedes-Benz. The average hourly pay for VW workers in the country is $66 per hour.

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In defense of labor costs, the works council highlights struggles at other VW Group companies like Porsche, Audi, and VW Financial Services. The council claims earnings from these companies through the first three quarters of 2024 are down, costing VW $5.8 billion.

In any case, VW is facing a financial crisis that could ultimately see three of its six factories in Germany close for good. Among them is the Transparent Factory in Dresden, a relatively small facility that currently builds the ID.3. The sprawling Osnabruck factory, where Porsche builds the 718 twins, is also on the chopping block. They'll soon be out of production in lieu of electric replacements. Osnabruck also builds the Volkswagen T-Roc Cabriolet, Europe's most popular mainstream convertible.