Volkswagen calls for a 10% reduction in salaries

German automaker Volkswagen is calling on its employees to take a 10 percent pay cut. In this way, the company seeks to maintain its competitiveness and jobs, and to obtain funds for future investments. This was stated in a statement released on October 30.

The statement was made following a demand by the IG Metall trade union to raise wages by 7% and renew collective bargaining agreements. The company said it could not meet these demands due to the economic crisis in the automotive industry.

Arne Meisswinkel, chief negotiator at Volkswagen AG, explained that the company is very concerned about the current trend in the automotive industry in Europe, and especially in Germany as a place to do business. The deterioration of Volkswagen’s performance in the third quarter emphasizes this. According to the negotiator, if the company remains at this level, it will not be able to finance its future.

The ongoing restructuring discussions between Volkswagen AG and a number of its brands, according to the statement, focus on achieving significant cost reductions.

By cutting salaries, Volkswagen wants to achieve the majority of its billion-dollar savings program, Germany’s Handelsblatt reported, citing a board document. Their proposed 10 percent cut in the main brand alone will bring almost €800 million a year, Reuters quoted. In addition to the elimination of various bonus payments, allowances and salary increases, the savings will amount to about €2 billion – about half of the planned amount.

According to Handelsblatt, the closure and sale of plants would have brought much less savings. According to the document, Volkswagen wants to adjust capacity, but avoid closing plants whenever possible, and if necessary, find new owners for the affected plants. The list of proposals also includes measures affecting component production and technical development.

Earlier, Daniela Cavallo, chairman of Volkswagen’s Works Council, said the company plans to close at least three plants in Germany and lay off tens of thousands of employees. In addition, employees are facing salary cuts and wage freezes in 2025 and 2026.

The German automaker intends to restructure its business amid high operating costs, declining demand, and increased competition from Chinese rivals.