Volkswagen's German factory is safe, but reports indicate that over 10,000 people will be laid off

On Friday, December 20, Eastern Time, Germany's Manager Magazin reported that Volkswagen plans to cut more than 10,000 employees in the coming years to save costs, but the magazine did not disclose the source of the information.

Additionally, after three months of intense negotiations, Volkswagen reached an agreement with its union leaders on Friday to reduce automotive production capacity without closing any factories. This agreement avoided further union strikes and somewhat alleviated tensions between the two sides.

According to a statement from the union committee on Friday, Volkswagen committed to retaining 10 factories in Germany and extending the employment protection agreement until 2030. In exchange, workers agreed to forgo part of their bonuses, reduce the number of trainees transitioning to permanent positions, and cut production capacity by hundreds of thousands of units across five factories.

These measures were reached after five rounds of negotiations and are far from the significant cost-cutting plan initially proposed by Volkswagen. The management initially planned to enhance competitiveness by laying off workers, reducing monthly salaries, and closing three German factories; however, this proposal faced strong opposition from union leaders.

Ultimately, management persuaded the union to shift the production of the Golf hatchback from the Wolfsburg plant in Germany to lower-cost Mexico and reduce capacity at its Zwickau electric vehicle plant.

Currently, Volkswagen is facing challenges such as declining market share in China and slowing demand for electric vehicles in Europe and the United States. Analysts believe this agreement provides an opportunity for Volkswagen CEO Oliver Blume to turn around the company's fortunes.

On Friday, during intraday trading, Volkswagen ADR rose over 6.1% before halving its gains.