VW Group and labor union agree to cut 35,000 jobs; German plant closure to be postponed

On December 20, the Volkswagen Group and executives representing its workers reached an agreement to cut as many as 35,000 jobs in Germany by 2030 through severance and voluntary measures.

The move, which averted further strikes, ensures that there will be no forced layoffs and no plant closures in Germany until 2030. For the first time in its history, the automaker could close its plants in Germany, and officials representing them had previously warned that there were three potential sites.

However, the famous Transparent plant in Dresden, Germany, where the Volkswagen ID.3 is built, will cease production in 2025, and the VW Group said it is working on alternative options, including possible cooperation with third parties. The Belgian plant currently operated by the VW Group's Audi brand for the production of the Q8 E-Tron electric SUV is also expected to close in February.

The VW Group said it expects to save about 1.5 billion euros ($1.56 billion) a year by reducing labor costs, which together with other structural reforms and cuts in technology development costs will save more than 4 billion euros ($4.17 billion) annually in the medium term. One of the structural reforms is to reduce production capacity by 734,000 vehicles per year across its plants in Germany.

Specific measures include moving production of the Volkswagen ID.3 and its related Kupra-born sibling to the VW Group's main plant in Wolfsburg, Germany, where the Golf is currently produced. Production of the Golf will be moved to Puebla, Mexico, beginning in 2027. This means that production at the Wolfsburg plant will be streamlined from the current four lines to two.

Ten years later, the Wolfsburg plant will also begin production of the Mk9 Golf electric car and another model based on the SSP, a dedicated next-generation EV platform.

To reduce development costs, the VW Group said it will further integrate the technology teams for each brand. For example, in the future, VW brand technology teams will be in charge of technology development for all major VW Group brands.

VW Group said the move is a response to declining sales in Europe and strong competition, especially from China, where VW Group, along with its fellow German brands, has been losing market share in the key market of China due to a lack of locally suitable EV models, although it used to dominate.