Volkswagen Adjusts Production to Tackle Market Challenges

If you have been following automotive news over the past year, you may be aware that Volkswagen narrowly avoided shutting down its factories late last year. At the last minute, an agreement was reached between the labor union, the works council, and Volkswagen, preventing the closure of factories and the layoff of a large number of workers.

Now, the terms of this settlement are beginning to take effect, as Volkswagen"s manufacturing facilities prepare to reduce their production. According to reports from the Financial Times, the production cut is part of the agreement that also ensured no layoffs or facility closures until 2030.

Volkswagen plans to halve its production capacity following statements by Arno Antlitz, the CFO of the Volkswagen Group, that the company will only invest in highly competitive factories, considering German facilities a fair target for this change.

As a result of this significant reduction in production capacity, some factories, such as those in Zwickau and Dresden, will need to cut their costs by 20% to keep production lines operational.

Overall, Volkswagen will reduce its production from 1.5 million units to just 750,000 units. This substantial cut comes as the German factories produced around 900,000 vehicles last year, reflecting the company"s expectations of no growth in its European sales, especially with increasing competition from Chinese automakers.

David Powels, CFO of Volkswagen, told the Financial Times: "We are facing a market that is no longer growing and may stop growing in the future."