German auto giant Volkswagen formally canceled a 30-year-old job security deal with labor on Tuesday, raising prospects for compulsory redundancies at the company from July 2025.
Volkswagen, Europe's largest car manufacturer, also scrapped deals guaranteeing employment for trainees and regulating temporary work for the company.
Volkswagen announced last week that it could not rule out potential plant closures or layoffs because of major challenges currently facing the company. It also said it would scrap the job security deal in place since 1994.
The automaker has struggled to manage the shift to electric vehicle production, declining prospects in the important Chinese market and tough new competition from rising Chinese automakers. Volkswagen's financial performance has lagged behind other brands within the Volkswagen Group, which also includes Skoda, Seat, Audi and others.
The company said it hopes to negotiate new wage agreements and other deals with the trade union and works council to replace the canceled agreement by the time it lapses next year.
Volkswagen has never closed a factory in Germany and has not shut down a plant anywhere in the world since 1988.
"This period now gives us the opportunity to find solutions together with employee representatives on how we can make Volkswagen competitive and fit for the future in the long term," Volkswagen Human Resources Director Gunnar Kilian said in a company statement.
"We must put Volkswagen AG in a position to reduce costs in Germany to a competitive level in order to invest in new technologies and new products from our own resources," he said.
VW has a total of 120,000 employees in Germany, more than half of them in Wolfsburg.
Labor leaders have vowed to put up an intense fight against any plant closures or major cuts to the Volkswagen workforce.
Thorsten Groger, IG Metall district manager for Lower Saxony, spoke of "an unprecedented attack on the joint, historic collective labor agreement", with which VW is now escalating the situation unnecessarily. "It's better to solve the problems together and not against each other."
By unilaterally canceling the job security agreement, "Volkswagen is putting co-determination to one of the biggest tests in the company's history," he said.
Works Council Chairwoman Daniela Cavallo said on Tuesday that workers would "fiercely defend ourselves against this historic attack on our jobs. There will be no compulsory redundancies with us."
