VW labour deal leaves 'bitter taste' in Germany's Saxony, says expert

The planned cutbacks at German car manufacturer Volkswagen (VW) will have severe consequences for the eastern region of Saxony, automotive expert Werner Olle told dpa, after the company struck a deal with trade unions late on Friday.

"The agreement has avoided industrial action, which is an important result. However, Christmas does not look carefree," Olle, head of the Chemnitz Automotive Institute in Saxony told dpa.

Marathon talks between VW and labour representatives about cost-cutting measures at the carmaker ended in a breakthrough on Friday, with both sides portraying the deal as a success.

The IG Metall trade union said that the deal had averted the mass involuntary lay-offs and plant closures feared by employees.

However, VW said it still plans to eliminate more than 35,000 jobs in a "socially responsible" manner by 2030 in order to regain its competitive edge.

VW is also to halt vehicle production at the end of 2025 at its so-called Transparent Factory, which employs around 330 employees in the eastern city of Dresden in Saxony.

In addition, there are to be cutbacks at the VW plant in Saxony's Zwickau, which currently employs around 9,200 people.

From 2027, the plant in Zwickau is to only produce electric Audi vehicles, rather than the two models it currently produces.

"It's no wonder that this leaves a bitter taste in Saxony - the pioneer of e-mobility for the VW brand has done its duty," Olle said.

Tough negotiations

The labour negotiations between trade unions and VW company executives took place on and off for weeks, with the latest round beginning on Monday in the northern German city of Hanover.

According to IG Metall, the tough negotiations were the longest in Volkswagen's history.

VW executives say that high labour costs in Germany are contributing to disappointing financial results at Europe's largest carmaker, exacerbated by stiff competition in China and struggles with shifting to electric vehicles.

According to company executives, higher profit margins are needed to keep the core VW brand competitive and fund necessary investments.

As many as three of the 10 factories in Germany had been threatened with closure when negotiations began in September.

To put pressure on the company, IG Metall staged two days of factory strikes in December. According to the union, around 100,000 employees at nine locations took part in both strikes.

It promised to stage even lengthier strikes in the new year if a deal was not struck before the Christmas holidays.