Volkswagen considers closing down its German plants to cut costs

The move to cut down costs comes amidst the rising competition from Chinese brands.

According to media reports, Volkswagen, for the first time in its history, is considering closing down its factories in Germany, in a move to cut down costs.

The German automaker, one of the world's biggest car companies, released a statement mentioning that it did not rule out plant closures in its home country. In addition to this, the carmaker is also trying to terminate an employment protection agreement with the labour union - something which has been in place since 1994.

The move to cut down costs comes amidst the rising competition from Chinese brands. The company is also losing market share in China - its single biggest market.

Oliver Blume, CEO of Volkswagen Group, stated, "The European automotive industry is in a very demanding and serious situation. The economic environment became even tougher, and new competitors are entering the European market. Germany in particular as a manufacturing location is falling further behind in terms of competitiveness."

Blume told analysts, "Our main area of action is cost cutting. We have done all the organizational steps needed. And now it is about costs, costs and costs."

However, reports state that Volkswagen's plan to cut costs would face heavy resistance from labour representatives, who hold half the seats in the company's supervisory board. Thorsten Groeger, lead negotiator of IG Metall - one of Germany's most powerful unions, stated, "Today, the board presented an irresponsible plan that shakes the very foundations of Volkswagen, massively threatening jobs and locations."

He added, "This approach is not only short-sighted but also highly dangerous — it risks destroying the heart of Volkswagen… We will not tolerate plans that the company makes at the expense of the workforce."

Source: CNN