Volkswagen board faces crunch talks over plant closures and job cuts

By Rachel More and Christina Amann

WOLFSBURG, Germany, July 9 (Reuters) - Volkswagen's plan to cut up to 100,000 jobs and close four German factories faces a major test on Thursday as the groups that control Europe's largest automaker meet to discuss the proposals, while workers protest against the overhaul.

Grappling with high costs and excess capacity at home, rising Chinese competition and U.S. import tariffs, Volkswagen is under unprecedented pressure to restructure the business model that underpinned its success for decades.

The prospect of plant closures and deep job cuts at one of Germany's most storied companies, founded 89 years ago, also underscores the challenges for Europe's largest economy as it struggles with weak growth and high labour and energy costs.

At a supervisory board meeting at Volkswagen's headquarters in Wolfsburg, CEO Oliver Blume must convince the committee's powerful labour representatives to accept deeper cuts across the group, which includes the Audi and Porsche brands.

He is also under pressure from the Porsche and Piech owner families, whose core investments have lost tens of billions of euros in market value in recent years.

In Wolfsburg, workers blew whistles, waved red union flags and marched behind a banner reading "gemeinsam stark" — "strong together" — as a klaxon sounded in the background.

The IG Metall union said around 400 people were demonstrating in Wolfsburg alone, with union representative Thorsten Groeger warning the company risked a "major conflict" with workers.

The head of the company's works council, Daniela Cavallo, said staff were not to blame for the auto sector crisis, and "great fear and deep uncertainty" were spreading across the company's factories and offices.

"Industrial jobs here are at risk of going down the drain," unless Volkswagen and politicians got their act together, she warned in a speech in Wolfsburg.

A Volkswagen spokesperson said the company shared workers' concerns about the future but was reducing complexity and focusing on technology to strengthen its competitiveness.

"We are tightening our investment portfolio and streamlining our corporate structures," the spokesperson said in an emailed statement. "And yes, we will also have to reduce overcapacity."

UNPRECEDENTED RESTRUCTURING PLAN COULD DOUBLE JOB CUTS

In what would be Volkswagen's biggest restructuring yet, sources have said Blume is considering closing four German plants — Hanover, Emden, Zwickau and Audi's Neckarsulm site — and cutting up to 100,000 jobs, roughly double the number currently planned.

Production in Zwickau and Emden is set to be phased out in five years, Spiegel magazine reported, citing supervisory board sources. The Hanover commercial-vehicle plant would follow in 2032, and the Audi plant in 2034.

Volkswagen's supervisory board includes representatives of the owner families, unions and the Lower Saxony state government, a power-sharing structure that often complicates decision-making.

Volkswagen faced mass warning strikes in December 2024, but there is currently an agreement for workers not to take industrial action while existing work contracts are in force.

Under Blume's last restructuring deal from that time, unions secured a commitment from management to avoid German plant closures, prompting Volkswagen to seek alternative uses for underutilised sites.

Those efforts include a long-running search for a defence-sector partner for the Osnabrueck factory and the possibility of producing models designed for the Chinese market in Germany.

Mobility Global data seen by Reuters estimates the group's German car plants will operate at 81% of standard capacity in 2026. That figure is expected to fall to 73% by the end of the decade, even after the anticipated removal of Osnabrueck from the network.

Among the four sites threatened with closure, Zwickau is forecast to have the highest utilisation rate in 2026 at 88%. But that is expected to fall to 42% by 2030, the data showed.

UNION CALLS FOR SAFEGUARDING GERMAN PRODUCTION

Ahead of the supervisory board meeting, IG Metall is mobilising workers at around 20 Volkswagen Group sites across Germany to protest against the plans and press management to safeguard domestic production.

"This is a clear message to the board: Not on our watch!" IG Metall President Christiane Benner, who is also deputy chair of Volkswagen's supervisory board, said in a statement.

Trailing in the polls to the far-right Alternative for Germany, conservative Chancellor Friedrich Merz has promised a series of reforms to make Germany more competitive.

The AfD, which could take power in a German state for the first time in elections in September, has seized on Volkswagen's troubles as a line of attack against the government.

Sepp Mueller, a senior lawmaker in Merz's conservatives, told the Rheinische Post newspaper that Volkswagen's strategy was ultimately a matter for management.

(Reporting by Rachel More and Christina Amann, Alexander Hübner; Writing by Matthias Williams. Editing by Christoph Steitz, Elaine Hardcastle and Mark Potter)