Volkswagen to Close Three German Plants, Slash Pay as Competition Heats Up

Volkswagen, Europe’s largest automaker, on Monday announced plans to shut down three factories in Germany to cut costs and improve competition.

Daniela Cavallo, Works Council Chief, said the plans also include 10% universal pay cuts and reducing all remaining factories in the country.

Cavallo, who also sits on Volkswagen’s supervisory board, stated “This means taking out even more products, quantities, shifts and entire assembly lines far beyond what we have already done so far,” Cavallo said Monday in a speech in front of hundreds of VW workers. “This is starvation, a weakening in installments.”

According to Chief Executive Officer Oliver Blume, declining sales in Europe and heightened competition from BYD Co. in China are the reasons for cost reduction and the planned improved competition.

The decision was after the company’s third-quarter report showed declining sales, especially with the company’s premium brands, Audi and Porsche now struggling amid competition from Chinese manufacturers with affordable vehicles.

Porsche AG on Friday said it’s weighing cost cuts and reviewing its model lineup after a demand slump in China hit its profits.