Volkswagen may keep German factories open… for now

Up to three German Volkswagen factories have been at risk of shutting down amid falling profits for the car giant, but it now appears their immediate future is safe.

However, this could reportedly result in one of its most important and longest-running models being built for the world in Mexico, instead of next to Volkswagen’s global headquarters.

Volkswagen has been a victim of reduced market demand in Europe, which has been coupled with a decrease in earnings from its operations in China.

In a bid to trim costs, Volkswagen management publicly said it may shut three of its 10 factories, potentially resulting in tens of thousands of employees losing their jobs, while its workforce was also asked to take a 10 per cent pay cut.

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This led to strikes across a number of its German factories, with workforce representatives and management butting heads over how to move forward with minimal compromise.

Bloomberg now reports that a number of Volkswagen insiders told the publication the carmaker is willing to “keep plants running and reinstate job security agreements until 2030”, however workers won’t receive bonus payments.

This is one of the proposals reportedly tabled by Volkswagen management, and has yet to be accepted by those representing its workforce.

Other cost-cutting measures reported by Bloomberg include moving global production of the Volkswagen Golf hatchback to Mexico, away from the Wolfsburg factory where it’s been built since debuting in 1974.

Volkswagen has previously built the Golf in its Puebla factory in Mexico for the North American market, and South African-built Golfs had also previously been sold in Australia.

As with the discussions to keep the factories open, this is yet to be finalised or made official by Volkswagen.

According to Bloomberg, the carmaker has also tabled removing Volkswagen-branded electric vehicles (EV) from the Zwickau production line in Germany.

Currently, Zwickau makes the Volkswagen ID.3, ID.4 and ID.5, as well as the Cupra Born and Audi Q4 e-tron.

Workers from both the Wolfsburg and Zwickau factories have recently been striking, as well as those at the Hanover facility which makes commercial vehicles.

Previous claims by analysts have said Volkswagen’s Osnabrück and Dresden factories are two of the most likely plants to be closed.

The Osnabrück factory, which dates back more than a century and previously produced Karmann vehicles, currently produces the soon-to-be-defunct Volkswagen T-Roc Cabriolet (convertible), and previously handled overflow production of the mid-engined Porsche 718 (Cayman/Boxster).

However, production of their all-electric replacements will shift exclusively to Porsche’s main Zuffenhausen plant in Stuttgart, alongside the 911.

Meantime, Volkswagen’s Dresden factory – better known as the Gläserne Manufaktur or Transparent Factory – only builds the ID.3, though it was originally built to produce the Phaeton flagship, opening in 2002 at the reported cost of €186 million (more than A$300 million at the time).

Volkswagen’s unions have been critical of the carmaker for how it has thrown away its position as the world’s top vehicle maker and is now putting pressure on its workforce.

It peaked at 10,742,122 sales globally in 2019, a record figure beaten only once by another carmaker, Toyota.

In announcing its third-quarter financial results in October, Volkswagen said its year-to-date operating result was down by 21 per cent compared to the first nine months of 2023 – standing at €12.9 billion ($21.3 billion) to the end of September.

Its after-tax earnings were down 30.7 per cent on the first nine months of 2023, and were down 63.7 per cent comparing the third quarter of this year with the third quarter of 2023.

Volkswagen Group Australia, which does not plan to transition to electric vehicles (EVs) as soon as its European parent, told CarExpert in October the overseas cost-cutting is unlikely to affect its local operations.

“Our situation in Australia is unique in so many respects, not least of which is the fact our relationship with EVs is maturing,” said Volkswagen Group Australia corporate communications general manager Paul Pottinger.

“It’s not fully fledged or consummated as it is in Europe – we’re a completely different state.”

MORE: Volkswagen strikes begin as rifts between workers and management worsenMORE: Volkswagen CEO blames its current problems on ‘decades of structural issues’ MORE: Volkswagen announces pay cuts as profits fall MORE: Volkswagen set to close three German factories, lay off thousands – report