Volkswagen, a leading player in the automotive industry, announced plans to implement a 10% reduction in salaries for its employees in Germany as part of a strategy to cut costs and enhance competitiveness. This decision follows a significant 63.7% drop in net profits during the third quarter of 2024, a decline attributed to a broader downturn in vehicle sales affecting the entire sector.
The company is in the midst of a restructuring plan that poses a threat to tens of thousands of jobs. Negotiations regarding the proposed salary cuts are set for November 21, with potential strikes anticipated starting in December. The automotive sector has seen a 4.7% decrease in revenue in the first half of the year, a stark contrast to record results from the previous year.
Challenges for Volkswagen include high labor costs, which exceed 62 euros per hour in Germany, compared to significantly lower rates in countries like Spain, the Czech Republic, and Romania. The company’s employees, who have historically enjoyed job security guarantees, now face the prospect of salary reductions and no pay increases for the next two years.
Additionally, the competitive landscape has shifted, with Chinese manufacturers producing nearly one-third of the world’s vehicles at much lower costs. As German automakers transition to electric mobility, they are losing the technological edge they once held in combustion engines. The union IG Metall has criticized management for previous missteps and emphasized that past management errors should not burden the employees.
German Chancellor Olaf Scholz has echoed this sentiment, asserting that past managerial decisions should not negatively impact the workforce. Despite these challenges, experts believe that the restructuring efforts will have a limited medium-term impact on employment in Germany.