Returns at the expense of employees

Goodbye car. The VW factory in Osnabrück is to be taken over by a defense company

In the end it happened unexpectedly quickly. A bitter power struggle raged within the VW Group for weeks. The works council and unions mobilized - with the support of the state of Lower Saxony as a blocking minority shareholder - against the restructuring concept of the group's board of directors led by its chairman Oliver Blume. According to the will of the Porsche and Piëch owning families, drastic cuts are to be made to lead the automobile company out of the crisis.

Until recently, observers had expected the conflict to escalate further. The top management threatened to spin off the core Volkswagen passenger car brand and the components division from the group. In the VW Group, which was once founded by the National Socialists with money from the expropriated unions, major decisions such as relocating or closing plants can only be made with the consent of the employee representatives on the supervisory board. The threatened corporate restructuring would have undermined the extended co-determination rights of the works council at Volkswagen and would have effectively meant the end of the VW law of 1960. At that time, the former state-owned company was privatized - with the important restriction that the state of Lower Saxony received 20.2 percent and resolutions in shareholder meetings can only be passed with at least an 80 percent majority. This meant that the state, together with the employee representatives on the supervisory board, was able to prevent unpleasant decisions.

After the board and works council agreed to cut 50,000 jobs in 2024, a further 50,000 jobs are now to be eliminated by 2030.

At the beginning of September there was a surprising turnaround: under the impression of threats from the company management, the supervisory board unanimously decided on what VW said was “the most strategically profound transformation program in the history of the Volkswagen Group”. Although the planned spin-offs are off the table and with them the restrictions on co-determination, the capital side was largely able to implement its drastic savings program at the expense of the employees. The fact that the representatives of the state of Lower Saxony and the employees also support the restructuring concept is considered a success for Blume.

The central goal of the board concept is to increase the annual return to nine percent by 2030. To do this, the group wants to reduce its investment portfolio and divest itself of numerous company shares. The number of VW models produced is to be reduced by half by 2035 and factory capacities in Europe are to be reduced by 500,000 vehicles annually.

All of this has devastating effects for employees: After the board of directors and the works council agreed to cut 50,000 jobs in 2024, a further 50,000 jobs are now to be lost by 2030. The VW plants in Emden, Zwickau, Hanover and the Audi plant in Neckarsulm are up for grabs because “competitive subsequent occupancy on a staggered basis cannot currently be guaranteed from 2031 to 2034,” according to a company statement. In German this means: The models manufactured in the factories there will be discontinued. The preservation of all four locations is considered extremely unlikely, even if “alternative uses for these plants in parallel and in addition” are to be examined, as the company announced.

While the works council and union try to present the agreement as a partial success and point to the defense of co-determination and the negotiated postponement of any plant closures, the capital markets certainly know who emerged successful from the showdown at the large corporation. VW's share price rose significantly after the Supervisory Board approved the agreement.

The employees' hope is now for an alternative use of the locations after the end of car manufacturing. The future could promise arms production.

The hope of the employees in the plants threatened with closure is now focused on an alternative use of the locations after the end of car manufacturing. The future could promise arms production. This seems to be happening in Osnabrück. Production at the VW factory there, which employs around 2,000 people, will end in the summer of 2027. In order to keep the location, Volkswagen is close to reaching a deal with the Israeli state-owned defense company Rafael Advanced Defense Systems (Rafael). In the future, this could produce transport vehicles, launchers and power generators in Osnabrück for European customers of its “Iron Dome” missile defense system. A declaration of intent to convert the plant was signed in April. The works council and IG Metall welcome the plans.

The austerity decisions at Volkswagen could become a real support program for the AfD. While Lower Saxony, as a VW shareholder, is primarily pushing for solutions for the locations in Emden and Hanover, there is a lack of a corresponding lobby in Zwickau. Most recently, the workforce there has already shrunk from around 11,000 to 8,000 employees. Around 1,000 more jobs will soon be lost and one of the two production lines will be shut down in 2027. A closure would have fatal consequences for the Saxon economy. Currently, one in four industrial jobs in East Germany depends on the automotive industry. The end of the plant would affect suppliers as well as the numerous service providers dependent on VW.

If Zwickau were to be sacrificed, this would be grist for the mill of the AfD's anti-establishment course, which presents itself as the only champion of East German interests.