Volkswagen terminates labor agreements in Germany amid cost-cutting push

German automaker Volkswagen terminated several company-level collective bargaining agreements on Wednesday as it sought further cost reductions, drawing a sharp response from the IG Metall union.

The agreements will end Dec. 31.

Volkswagen said economic challenges required changes to provisions in its labor agreements while rejecting the union’s demand for a 5% wage increase.

Arne Meiswinkel, the Volkswagen brand’s board member responsible for human resources, said the automotive industry’s economic environment had deteriorated significantly over the past 18 months.

Meiswinkel cited growing competition from Chinese manufacturers in Europe and described the market changes as structural and far-reaching.

He said Volkswagen faced an increasing need to bring costs to a competitive level.

IG Metall said Volkswagen on Wednesday handed over termination notices for 10 agreements during a meeting in Hannover intended to review commitments under the company’s 2024 restructuring deal.

The affected agreements cover pay, working conditions, additional compensation, employees with special working hours, and staff in specialist or management roles, according to the union.

Parts of the agreement governing apprentices’ employment after training were also terminated, it said.

The agreements include a framework governing working hours, 30 days of annual leave and protections for older employees and those with health limitations, according to IG Metall.

The union stressed that the employment guarantee through the end of 2030 remained unaffected.

It also said terminating the agreements would not immediately remove every provision because some continue to apply after termination.

IG Metall negotiator Thorsten Groeger accused Volkswagen of seeking to shift business costs and risks onto employees who had already accepted substantial concessions under the 2024 deal.

The union said those concessions contribute around €1.5 billion ($1.7 billion) annually from 2025 in return for commitments to invest in the future of Volkswagen’s sites.

Works council chair Daniela Cavallo said employees had already reached the limit of acceptable concessions in 2024 and warned of a fierce dispute around the turn of the year.

IG Metall said it would consult its bargaining commission and employee representatives on its next steps, with strikes possible from Jan. 1, 2027.