Volkswagen AG cuts costs again, even the 30-year-old German job security agreement is to be canceled

To reduce costs, Volkswagen Group has decided to cancel job security for German auto workers, which may lead to intense confrontation between the company and the union. On Tuesday, September 10th, Eastern Time, Volkswagen announced the cancellation of several employment security agreements related to a 30-year-old agreement. The agreement was originally intended to secure employment for workers until 2029, but now the security will expire by mid-next year. Gunnar Kilian, Volkswagen's HR director, mentioned in a statement: "Volkswagen's series of actions is aimed at reducing costs in Germany to a competitive level." Analysts believe that Volkswagen, known for its engineering prowess, canceling job security commitments, indicates that Europe's largest economy may be falling behind in competitiveness. For example, BMW lowered its full-year profit expectations earlier on Tuesday due to issues with brake systems provided by German supplier Continental AG, leading to the recall of 1.5 million vehicles. Meanwhile, Volkswagen is striving to cut costs, with the announcement last week that it may close a German factory for the first time as previous cost-cutting measures have not been effective. Furthermore, European automakers are currently facing fierce competition from emerging companies like Tesla. This puts traditional car manufacturers, including Volkswagen, under immense pressure. Compared to other companies, Volkswagen's layoffs and cost-cutting measures are more challenging to implement. Half of the company's supervisory board seats are held by labor representatives, and the state of Lower Saxony, which holds a 20% stake, often sides with the unions. Volkswagen employs nearly 300,000 workers in Germany. According to Thorsten Gröger, chief negotiator for the major union IG Metall, Volkswagen's plans could lead to additional costs close to 1 billion euros (1.1 billion dollars). In another statement, he mentioned that ending security measures would trigger wage increases based on previous collective bargaining agreements. While Volkswagen has expressed willingness to engage in early dialogue with union representatives in upcoming negotiations, the union quickly stated that they will strongly oppose the cancellation of job security plans. This means that Volkswagen may face fierce opposition from the union, thereby increasing costs. The union has made it clear that they will vehemently oppose any layoff plans. Daniela Cavallo, a top employee representative and member of the supervisory board at Volkswagen, stated: "We will strongly resist this historic blow to our jobs. With our determination, there will be no layoffs."