With about 1.2 lakh of Volkswagen’s 2 lakh strong global workforce based in Germany, the shutting down of a couple of factories will impact a huge number of employees feel analysts from Jefferies. At least 15,000 may be rendered jobless.
The company has been contemplating closing down two or three factories. This, according to the analysts, who have been discussing the matter with company management, will definitely lead to a fall in the number of units produced, by at least five lakh. In fact, the loss in the volume of production could go up to 7.5 lakh units.
Earlier this month, it was reported that Volswagen was considering cutting jobs as part of a plan to reduce costs and increase profits. In fact, the plan of factory closures is also part of a €10 billion cost-cutting effort. It was hoped that with these cuts, the carmaker will be able to raise its profit margin to 6.5 per cent by 2026, up from 2.3 per cent in the first half of this year.
The closure of the plants itself will cost about €4 billion.
With the management determined to do away with redundancies and reduce expenditure immediately, the workers’ unions cannot really do anything to stop plant closures or layoffs unless their contracts protect them. The only option they have is to try and negotiate on wages/compensation. Strikes and protests may be expected because the auto maker had already eliminated its 30-year old job-protection provision.
Arno Antlitz, CFO, Volkswagen has earlier highlighted the fact that the number of cars being produced is way lower than the capacity of the factories indicating the need to make the workforce size leaner.
