Volkswagen (VW) has reached a significant agreement with unions after protracted and intense negotiations, culminating in the company’s decision to cut over 35,000 jobs in Germany. This marks a crucial step in VW’s strategy to streamline its operations amid rising competition from cheaper Chinese carmakers and slower adoption of electric vehicles. The deal, which followed 70 hours of grueling talks, is hailed by union leaders as a “Christmas miracle” and is seen as a major victory in avoiding widespread strikes that could have crippled the company further. While no immediate plant closures or layoffs were included, the agreement involved a major restructuring of VW’s workforce and production capacities.
The labor negotiations, which spanned several months, have been particularly intense, with the company grappling with declining demand in Europe and growing pressure from global competitors. Workers staged two large strikes in the past month, protesting against the company’s cost-cutting plans. Under the newly agreed-upon measures, VW plans to reduce its German workforce by about a quarter and cut production capacity by 700,000 vehicles. This restructuring is expected to result in annual savings of approximately €15 billion, offering a path toward improved competitiveness. Importantly, the company will not be imposing wage cuts or mandatory redundancies. However, some employee bonuses will be reduced or eliminated, and workers at VW’s key Wolfsburg plant will see a reduction in production lines, from four to two.
Volkswagen’s management expressed optimism about the future direction set by the agreement. CEO Oliver Blume said the deal would allow the company to “successfully shape our destiny,” reflecting a renewed focus on long-term sustainability. This restructuring also involves significant adjustments to the company’s German operations, including the closure of the Dresden plant by the end of 2025 and a potential sale or repurposing of its Osnabrück site. Production at both of these plants will be shifted to other locations, including Mexico. Despite these changes, no layoffs will occur for operational reasons, and the existing company wage agreement will remain in place for the foreseeable future.
The deal is also viewed as a win for VW’s investors, who have been concerned about the company’s ability to navigate a tough European market. VW shares rose 2.4% in after-hours trading following the announcement. However, analysts warn that the agreed-upon cuts may not be enough to address the broader challenges facing the European automotive industry, particularly with the stagnation in car sales and the uncertain future of electric vehicle adoption.
The negotiations, which began in September, took place in a no-frills business hotel in Hanover, where both sides endured lengthy discussions punctuated by moments of rest. Despite the exhaustion, both union representatives and management appeared committed to finding common ground, recognizing the urgency of resolving the impasse before a potential escalation of strikes. With over 100,000 workers having already participated in protests, both sides acknowledged the high stakes of the situation.
The outcome of the talks comes at a politically sensitive time, as Germany faces broader economic challenges and a snap election in February. Chancellor Olaf Scholz, while under pressure ahead of the vote, welcomed the deal, calling it a “good, socially acceptable solution” that would allow both VW and its employees to look forward to a more stable future.