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Volkswagen announces the closure of three factories and thousands of layoffs, in addition to salary cuts and a freeze on benefits. The transition to electric cars and competition from Chinese automakers are putting pressure on the company to restructure its costs.
Volkswagen, one of the biggest names in the automotive industry, recently announced a controversial plan to restructure its production in Germany, closing activities in at least three of its ten factories in the country.
Thousands of workers will lose their jobs as the company struggles to cope with the pressures of a transition to electric vehicles and fierce competition from Chinese manufacturers.
In Brazil, the company is experiencing a scenario of ups and downs, with production stoppages, financial challenges and an announcement of a billion-dollar investment that could impact the local economy.
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According to Daniela Cavallo, president of the Volkswagen employees' council, the decision to close factories and reduce staff is not a mere negotiation strategy.
For her, the group is, in fact, starting a “liquidation” of its operations in Germany.
The statement was made public in a speech to hundreds of workers at the company's headquarters in Wolfsburg, where Cavallo sharply criticized Volkswagen's management and what he described as a "direct threat" to German job security.
This restructuring is not limited to just closing factories.
The company also plans to cut salaries by 10% and suspend benefits such as bonuses, in addition to proposing a salary freeze for the next two years.
These proposals were met with resistance from the IG Metall union, which, in return, is demanding a 7% annual salary increase.
The expectation of financial loss for the company should make collective negotiations, which are starting soon, quite heated.
The impact of the electrical transition
Volkswagen, like several other global automakers, is struggling to transition to the electric vehicle market.
Furthermore, competition from Chinese electric vehicle brands, which are gaining popularity in Europe with lower prices, further intensifies the challenges.
This scenario led Volkswagen to rethink its structure and operating costs in Germany and Europe in order to increase its competitiveness in an increasingly demanding sector.
The employee representative also revealed that there are plans to reduce operations across Europe, which could include transferring some of these activities to countries outside the continent, without ruling out a potential influence on the company's subsidiaries, such as Volkswagen do Brasil.
Volkswagen's situation in Brazil
Volkswagen's operations in Brazil, although also facing difficulties, have a strategy that differs in some aspects from the reality faced in Germany.
The company recently announced a investment plan of R$ 9 billion until 2028 for the development of new models and technologies, with a focus on hybrid vehicles and more sustainable solutions.
This amount reinforces Volkswagen's commitment to maintaining a relevant presence in Latin America, which has proven to be a growing market for electric and hybrid vehicles.
On the other hand, the Brazilian market also has its challenges.
In 2023, Volkswagen halted production at its three main car factories in the country — located in São Bernardo do Campo, Taubaté and São José dos Pinhais.
These interruptions, justified by the company as a response to stagnant demand and rising production costs, affected popular models such as T-Cross, Nivus, Polo and Saveiro.
Furthermore, the high Selic rate and the high price of automobiles have been significant barriers, limiting the purchasing power of Brazilian consumers.
What is at stake for the Brazilian automotive market?
In parallel, the Brazilian government has been discussing possible incentive measures for the sector, including the extension of a program that aims to facilitate the purchase of vehicles.
However, political figures such as Planning Minister Simone Tebet have highlighted the need for tax reform to reduce production costs in Brazil.
The situation of car manufacturers in the country reflects a larger structural problem, which requires changes to make the sector more competitive and less dependent on government incentives.
As VW looks for ways to cut costs and adapt to the demands of a rapidly changing market, it remains to be seen how these decisions will impact its employees and customer base.
In Brazil, although the billion-dollar investment signals a long-term commitment, production stoppages and the decline in demand make it clear that the company's future also depends on economic adjustments and structural changes in the country.
The future of Volkswagen: a journey of uncertainty
Volkswagen remains firm in its intention to redefine its direction in the global market, with one foot in innovation and the other in austerity.
But with job cuts in Germany, a competitive market in Europe and economic challenges in Brazil, the German automaker's path is far from predictable.
The transition to sustainable vehicles represents both a promise and a challenge, and the impacts of these changes extend far beyond factories and dealerships.
Can Volkswagen balance the pressure to transition to electric power with the need to maintain its workforce and global presence? Or will we see a move to expand outside of Europe that will change the way the automaker operates forever?
