For the first time in its 87-year history, Volkswagen – popularly known as VW – is contemplating the shutdown of some factories in Germany. A shocker it was, considering from its birth in 1937, it had never shut down a single plant in its home country. However, with increasing costs and pressure to shift to electric cars, VW is finding it tough to keep all of its factories running.

Tough Times for Volkswagen
Many are the challenges that have been facing Volkswagen. The carmaker needs to cut about €10 billion – approximately £8.4 billion – by 2026. Making that happen will require some of those tough decisions, perhaps closing German factories, an idea that’s never been seriously considered before, but now VW says it can’t rule it out.

The company contemplates two oversized vehicle and component factories in Germany as being obsolete. This may mean the closing of the factories, which will help save money. Union leaders are angered by this prospect. They refer to the situation as a “black day” and promise to fight the closures.
Cost Cutting to Survive
There is a pressure on Volkswagen to cut costs as it realigns itself amidst major changes in the car market. The world is moving to electric cars, and traditional carmakers, such as VW, come under pressure. New entrants, some of them from outside Europe, make it even more competitive.

CEO Oliver Blume called recent economic conditions so much more difficult. Thus, according to him, Germany as a location for a business is increasingly losing its competitiveness. That’s why, with a high sense of seriousness, urgent economizing measures should be taken by VW for the sake of remaining competitive.

Ending Job Security: Tough Decision
Most shocking is the decision to terminate its job security program, which has been in place since 1994 and was meant to prevent job cuts until the year 2029. Now VW claims it may have to jettison this program as part of its survival. This would drive a deeper wedge between the company and workers.

Representatives of the workers hold half of the seats in VW’s supervisory board, which oversees management, and thus their voice is loud in whatever transpires within the company. The German state of Lower Saxony also owns a 20% stake in VW and usually sides with the workers. So, any decision to cut jobs or close factories will be a big deal and could lead to a major dispute.

Resistance from the Unions and Concerns
Union leaders aren’t taking the plans lying down. They pledged “fierce resistance” to any closures or job cuts, saying it would be ungrateful if the company closes factories or ends their job security program on the workers who stood by the company for so long.

Thomas Schaefer, the head of the VW brand, also seconded the seriousness. According to him, it is not possible to solve problems faced by VW through cost-cutting measures. The company needs to think twice in the next steps to avoid adding to the worst.

Why Does VW Suffer?
So, why does Volkswagen have so many problems today? The most important one is the shift to electric cars. “Governments around the world are demanding cleaner, greener cars. That requires the carmakers to invest billions of pounds in the development of new electric models and technology.”.

In addition, VW has to bear some intrusion of new competitors in the electric car market. Firms like Tesla are already established, while other new entrants find their way into the European market at an increasing speed. VW has to save money by cutting costs so as to be at pace with all these changes, and apparently, the only option is the closure of some factories.

The Future of Volkswagen
This is where Volkswagen reaches the crossroads. The decision now boils down to the extent to which cost-cutting could be allowed without marginalizing its workers and their unions. If VW were to close its factories in Germany, this would be the first time in 87 years that such a fate would befall the company in its country of origin.

The next few years will be decisive on the road for VW. The company has to work out how to cut its costs and win in its shift to electric cars, without losing its workers and unions. Certainly not an easy trick, and how it is going to work out can only be said after some time elapses.

Conclusion: What Awaits VW?
This really puts Volkswagen behind the eight ball. The carmaker is fighting against poor economic conditions, fierce competition, and its transition to electric cars. For the first time in history, the company may close its factories in Germany-a sign that the case is as serious as it gets.

Over the next few months, VW faces some very tough decisions. Whether it’s plant closures, the end of job security, or other ways to save money, one thing is sure: the road ahead for Volkswagen isn’t easy.

With workers and unions ready to fight back, it remains to be seen how these challenges will be addressed and dealt with, and what the future holds for one of the most famous car brands in the world.