For the first time in history! Volkswagen is reportedly considering closing its factories in Germany to further reduce costs

According to Bloomberg, Volkswagen is considering closing its factories in Germany for the first time to further reduce expenses. This is another blow to Chancellor Olaf Scholz's government.

The potential measures, as stated in a statement released on Monday, are not only aimed at its main passenger car brand but also include other group entities. Volkswagen may also attempt to terminate agreements with the union that guarantee job security until 2029.

Volkswagen's passenger car brand has long suffered from low profit margins, and the company has been looking to cut costs. With the challenging transition to electric vehicles and slowing consumer spending, cost-cutting has become even more difficult. Volkswagen CEO Oliver Blume stated in the announcement:

"The environment has become more challenging, with new competitors entering Europe, and Germany is falling further behind in competitiveness."

The company plans to close at least one large car manufacturing plant and a component factory in Germany, and abolish wage agreements. Volkswagen has around 650,000 employees globally, with nearly 300,000 in Germany.

If these closures are implemented, it would be the first time in Volkswagen's 87-year history that it closes factories in Germany, leading to a clash with Germany's powerful unions. Half of Volkswagen's supervisory board seats are held by union representatives, and Lower Saxony (which holds a 20% stake) typically sides with union organizations. Historically, union conflicts have led to the ousting of many former CEOs.

Previous conflicts have shortened the tenures of top executives including former CEOs Bernd Pischetsrieder, Wolfgang Bernhard who was in charge of the Volkswagen brand, and Herbert Diess, Blume's predecessor. All three CEOs had attempted to improve efficiency in Volkswagen's German operations