Volkswagen, Germany’s largest automaker, has formally canceled a 30-year-old job security agreement with labor unions, a move that could open the door to compulsory redundancies starting in July 2025. The decision comes as the company grapples with major industry challenges, including the transition to electric vehicles (EVs), declining prospects in China, and growing competition from Chinese car manufacturers.
The job security pact, first established in 1994, was a crucial agreement that protected Volkswagen employees from layoffs. However, Volkswagen has been facing mounting financial difficulties as it tries to keep pace with the industry’s shift toward EV production and navigate fierce competition in global markets. The company announced last week that plant closures or layoffs could not be ruled out in the near future.
Along with scrapping the job security agreement, Volkswagen has also ended contracts guaranteeing employment for trainees and regulating temporary work. The automaker stated that it hopes to negotiate new deals with trade unions and the company’s works council to replace the void left by the canceled agreements.
Gunnar Kilian, Volkswagen's Human Resources Director, emphasized that this period offers a chance to find solutions collaboratively. "This gives us the opportunity to work with employee representatives to ensure Volkswagen’s long-term competitiveness. We must reduce costs in Germany to a competitive level in order to invest in new technologies and products from our own resources," Kilian said in a company statement.
Volkswagen, which has 120,000 employees in Germany—more than half based in Wolfsburg—has never closed a factory in its home country. In fact, it has not shut down any plant globally since 1988. Despite this, the company’s financial struggles and performance lags behind other brands in the Volkswagen Group, including Skoda, Seat, and Audi, raising fears that layoffs could be imminent.
Volkswagen’s decision to cancel the job security deal marks a turning point in the company’s labor relations and sets the stage for potentially significant workforce changes in the coming years. As the automaker navigates the complexities of industry transformation, negotiations with labor representatives will be crucial in shaping the future of its German operations.
