VW reaches union deal to chop 35,000 German jobs after gruelling talks

By Christina Amann

HANOVER (Reuters) -Volkswagen on Friday introduced sweeping modifications to its German operations, together with greater than 35,000 future job cuts and sharp capability reductions in a last-gasp deal between Europe’s prime carmaker and unions to avert mass strikes.

Union leaders hailed the settlement as a “Christmas miracle” after 70 hours of gruelling negotiations, the longest within the firm’s 87-year historical past. There can be no fast web site closures or layoffs, and VW appeared to have backed away from demanding 10% wage cuts.

The deal avoiding expensive strikes might also present reduction to buyers after months of negotiations. Shares rose 2.4% in prolonged commerce after the deal. They’ve misplaced 23% this yr .

Volkswagen (ETR:VOWG_p) has been in talks with union representatives since September over measures it referred to as vital for it to compete with cheaper Chinese language rivals and deal with lacklustre demand in Europe and slower-than-expected adoption of electrical autos.

Round 100,000 staff have already staged two separate strikes up to now month, the biggest in Volkswagen’s historical past, protesting in opposition to cost-cutting plans.

“With the bundle of measures that has been agreed, the corporate has set a decisive course for its future when it comes to prices, capacities and constructions,” Volkswagen Group CEO Oliver Blume mentioned in an announcement.

“We are actually again able to efficiently form our personal future.”

VW mentioned the deal would permit financial savings of 15 billion euros ($15.6 billion) yearly within the medium time period and noticed no vital affect on its 2024 steerage. Whereas there have been no fast closures, VW mentioned it was trying into choices for its Dresden plant and repurposing the Osnabrueck web site, together with searching for a purchaser. Some manufacturing can be shifted to Mexico.

Automobile manufacturing would shut on the Dresden plant by the tip of 2025. VW AG’s workers is not going to get raises underneath a collective wage settlement over the subsequent 4 years, whereas some bonuses shall be scrapped or diminished.

Manufacturing at VW’s Wolfsburg plant, its greatest, shall be lower to 2 meeting strains from 4.

“No web site shall be closed, nobody shall be laid off for operational causes and our firm wage settlement shall be secured for the long run,” mentioned works council chief Daniela Cavallo.

TALKS INTO THE NIGHT

The fifth spherical of negotiations had been underneath means since Monday and continued deep into the night time in Hanover this week, with negotiators solely taking quick breaks to sleep and gas up on espresso, curried sausage and fruit.

The 35,000 future job cuts would symbolize round 1 / 4 of VW’s workforce and are available in tandem with lowering the corporate’s community of German crops by greater than 700,000 autos.

IG Metall chief negotiator Thorsten Groeger nonetheless mentioned the cuts, which might not contain obligatory redundancies, have been a part of an answer to deal with overcapacity and can be performed in a socially accountable method.

Matthias Schmidt, a European auto markets analyst, mentioned: “35K job cuts on a demographic curve as much as 2030 is probably going not sufficient and over a too longer timeframe to deal with the present stagnation we’re seeing throughout the European market.”

He added: “I’d say the unions can take extra from this than VW however realistically due to the difficult construction of the corporate this was in all probability one of the best they may have realistically hoped for.”

High shareholder Porsche SE welcomed Friday’s deal as a “vital enchancment in Volkswagen’s competitiveness”, including it was now essential to implement the cuts.

CAMPAIGN ISSUE

The talks happened in a dated no-frills enterprise lodge on the outskirts of Hanover, the place delegates from each side met in varied rounds that have been at instances interrupted by breaks throughout which they stocked up on espresso and fruit properly after midnight.

Some staff performed a spherical of playing cards to decompress.

The disaster at VW has hit at a time of uncertainty and political upheaval in Europe’s largest economic system, in addition to wider turmoil among the many area’s automakers.

The query of the way to repair Germany’s sluggish development has taken centre stage as a marketing campaign subject forward of a snap election in February, whereas Chancellor Olaf Scholz, trailing within the polls, has urged VW to maintain all its factories open.

Scholz on Friday night time welcomed a “good, socially acceptable answer”, including in an announcement, “Regardless of all of the hardships, it ensures that Volkswagen and its workers can look ahead to a great future.”

Alexander Krueger, chief economist at Hauck Aufhaeuser Lampe Privatbank, mentioned at first look it seemed to be a compromise the perimeters can dwell with.

“Different firms are additionally pursuing job-cutting plans, and VW seems to be only the start,” he mentioned. “Aggressive worth stress will in all probability require additional changes at a later date.”

Former Volkswagen bosses, together with Herbert Diess and Bernd Pischetsrieder, failed of their makes an attempt to make far-reaching modifications to the Wolfsburg-based carmaker because the unions stood agency.

IG Metall’s risk of strikes was a strong bargaining chip. UBS estimated each strike day in Germany could have value VW as much as 100 million euros in income and round 20 million in working revenue, primarily based on 2,000-3,000 fewer autos produced per day.

($1 = 0.9579 euros)