Volkswagen reaches an agreement to avoid the closure of plants in Germany

Volkswagen has reached an agreement with the IG Metall union that will prevent the closure of plants in Germany and avoid immediate forced layoffs.

However, both sides agreed to cut more than 35,000 jobs across the country in a “socially responsible way” by 2030, aiming to save around €15bn (£12.4bn).

Germany’s biggest carmaker had previously warned it may have to close plants in the country for the first time in a bid to cut costs.

After lengthy negotiations that began in September, the union said Friday that the two had “managed to find a solution” that secures jobs and allows for future investment.

VW was considering closing up to three factories in Germany and had been asking its workforce to take a 10% pay cut.

At that time, the union was asking for a 7% increase.

Although the agreement will also mean a reduction in production capacity at all its plants, it was welcomed by union leaders.

“No plant will be closed, no one will be laid off for operational reasons and our corporate wage agreement will be guaranteed in the long term,” said IG Metall works council head Daniela Cavallo.

“We have achieved a solid solution in the most difficult economic conditions,” he added.

The 35,000 job cuts by 2030 are expected to be addressed through different solutions, such as offering early retirement.

Under the agreement, a previously agreed 5% wage increase will also be suspended in 2025 and 2026.

The union said this would help “support transformation” at the company.

The number of apprenticeships offered each year in Germany will also be reduced from 1,400 to 600 from 2026, and moving part of production to Mexico will be studied.

It is also studying alternative options for its locations in Dresden and Osnabrück.

But Oliver Blume, VW group chief executive, said in a statement that the deal was “an important signal for the future viability of the Volkswagen brand.”

The closure of factories in Germany would have been unprecedented in the manufacturer’s history.

VW, along with other German automakers, has been hit hard by a drop in demand for its cars in China, once a lucrative market.

At the same time, Chinese brands have been moving to Europe, increasing competition for sales.

During the talks, some 100,000 workers joined so-called “warning strikes” at plants across the country to pressure company management.

The latest round of talks began on Monday, with negotiators apparently determined to resolve things before Christmas.

German Chancellor Olaf Scholz also welcomed the announcement, calling it a “good and socially acceptable solution.”