Volkswagen reported a 42 percent drop in quarterly profit on Wednesday, while emphasizing an “urgent need” to cut costs and gain efficiency in a challenging marketplace as it considers plant closures and layoffs in Germany.
The automaker’s negotiator pointed to the company’s weak earnings ahead of his meeting with union leaders, who warned of imminent strikes if a solution to cut costs and restructure the brand was not found.
The Volkswagen Group, which owns 10 brands, including Audi and Porsche, is Germany’s largest industrial employer, with 120,000 people working for its eponymous core brand. The country’s vision of itself as an economic powerhouse and automotive giant is also deeply intertwined with Volkswagen, and local economies across the country depend on the company and its well-paid workers.
Representatives from the automaker and IG Metall, the union representing most of its workers, convened for a second round of wage negotiations on Wednesday in a conference room in the Volkswagen Arena, the stadium of the company’s professional soccer team, VfL Wolfsburg.
Before the talks, Volkswagen reported that profit fell to 2.86 billion euros, or $3.1 billion, for the months of August to September, its lowest level in three years. The company is struggling against falling demand in China, the world’s largest car market, and high costs, especially in its homeland, Germany.
“The situation is getting worse,” Arne Meiswinkel, the chief of personnel at Volkswagen, who is leading negotiations for the company, told reporters before the negotiations began.
But union leaders insisted that a guarantee by the company that all 10 of its factories in Germany would remain open was a prerequisite for them to stay at the negotiating table. The union is prevented from staging any strikes until the end of November, but leaders said that they would begin preparing walkouts unless their demand was met.
“We expect Volkswagen to declare its willingness to enter into negotiations with us on a viable future concept for all sites,” Thorsten Gröger, chief negotiator of IG Metall union, told reporters ahead of the talks.
“Otherwise, I say quite clearly, we will have to plan the further escalation with our negotiating and bargaining committee,” he said.
On Monday, the company’s top employee representative said that management had informed the works council that it was considering shutting down as many as three factories in Germany and laying off tens of thousands of workers. The closures would be the first in the 87-year history of the company and would be a further blow to Germany’s stagnant economy.
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