Volkswagen Disrupts the Auto Industry with Mass Layoffs and First Plant Shutdowns in 36 Years...

In what can only be described as the automotive equivalent of announcing a vegetarian-only Oktoberfest, Volkswagen has decided to perform its most impressive crash test yet: slamming straight into its own workforce. 

(Source: Giphy) 

In short, the company that once brought you the "People's Car" is now bringing you the "People's Pink Slip” as the German auto giant is ready to hit the brakes on multiple factories, lay off tens of thousands of employees, and slash salaries as part of a cost-cutting overhaul. 

Meaning, following in the proud tradition of German efficiency, VW has determined that the most efficient number of employees is apparently fewer of them. The company is eyeing the closure of at least three factories in its homeland, marking the first such shutdown since 1988 - back when David Hasselhoff was still considered a legitimate musical artist in Germany.

(Source: Reuters) 

Daniela Cavallo, head of VW's works council and current bearer of the worst news since someone had to tell Hitler his art career wouldn't pan out, announced that no German plant is safe. “All German VW plants are affected by these plans. None of them are safe,” Cavallo told a crowd of thousands in Wolfsburg, where VW has been headquartered for nearly 90 years.

The reasoning behind this corporate self-immolation? Well, it seems VW has discovered that paying German workers German wages while competing with Asian manufacturers paying Asian wages isn't exactly a winning strategy. Who knew? For instance, according to VW brand chief Thomas Schaefer, some of their factories are operating at twice the cost of their competitors. Ooof.  Plus, add in the fact that their electric vehicle program has all the momentum of a gasoline led dumpster fire, and you've got yourself a genuine Deutsche disaster.

(Source: Jalopnik) 

To add more salt to the wound, VW announced that salaries will be cut by at least 10%, and workers can kiss pay raises goodbye in 2025 and 2026. Meaning, workers are being told to hit the streets, while executives presumably continue to debate which color their next Porsche should be.

(Source: Giphy) 

Now with that said, VW’s unions are not taking this lying down, and why should they? Germany’s labor unions, especially IG Metall, hold some serious clout. They've already threatened strikes starting December 1st if the company doesn't come to the table with a better deal. Cavallo even hinted that if VW confirms this “dystopian path” on Wednesday, they should be ready for some serious backlash.

Especially considering this is all coming to a head at one helluva inconvenient time. You see, with elections looming and Chancellor Olaf Scholz trailing in the polls, this could be a major hit to the campaign's narrative. The economy is already on shaky ground, and now VW’s factory closures could send it further into a tailspin. So yeah, not good for Germany or VW. 

(Source: Bloomberg) 

For this reason, VW shares dropped 1% on the news, though at this point, investing in VW stock has been about as rewarding as investing in a collection of Beyonce NFTs. The company has lost 44% of its value over five years, making it the "hold my beer" moment of atrocious automotive investments. 

(Source: Giphy) 

In the end, VW’s executives will meet with IG Metall later this week to hash out a new collective bargaining deal, and it’s safe to say that negotiations are going to be fierce. Strikes are on the table, and with the fate of 300,000 VW workers in Germany hanging in the balance, this could get ugly.

In the meantime, keep an eye on this German giant and be aware of the repercussions that could be felt across the whole sector. As always, stay safe and stay frosty, friends! Until next time… 

P.S. SURPRISE ALERT! Click here for the details…

Stocks.News does not hold positions in companies mentioned in the article.