Volkswagen AG is considering closing manufacturing plants in Germany for the first time in its history, a move that could ignite significant labor disputes and mark a pivotal shift in the country’s industrial landscape. The company is also contemplating ending a longstanding agreement with unions that has protected jobs for decades.
The potential closures highlight growing concerns over Germany’s declining competitiveness, particularly in the electric vehicle (EV) sector. Volkswagen CEO Oliver Blume recently criticized Germany as a business location, citing the government’s abrupt removal of EV incentives last year as a key factor in the country’s waning appeal to manufacturers.
Germany’s strong unions have also played a role in the company’s deliberations, with past disputes leading to the departure of several CEOs. The possibility of plant closures raises questions about where Volkswagen, the nation’s largest industrial employer, might shift its operations.
Recent studies indicate that foreign direct investment (FDI) inflows into Germany have reached a decade-low, while significant FDI outflows suggest the early stages of de-industrialization. Amid this challenging investment climate, Volkswagen and other German automakers, such as BMW, are increasing their investments in China. Volkswagen announced a €2.5 billion expansion of its production and innovation hub in Hefei, China, earlier this year.
As the trend toward de-industrialization continues, companies like Volkswagen must navigate the complex balance between cost-saving strategies and the geopolitical risks associated with deepening ties with China.
