Volkswagen is planning to shut down three German factories and cut tens of thousands of staff members, marking the first domestic plant closures in the automaker's 87-year history. 

According to Reuters, the company also plans to downsize its remaining plants, reduce worker salaries by at least 10%, and freeze pay raises for the next two years. Volkswagen's brand division head Thomas Schaefer estimates that German factories have been operating up to 50% above budget, all while the automaker has struggled with lagging demand in both China and Europe, as well as a slower-than-anticipated shift to electric vehicles. 

Volkswagen has been negotiating for weeks on its planned reductions with German metalworker union IG Metall, after ending a labor deal in September that had protected the union's workers from layoffs for the last 30 years. On October 28, IG Metall district director Thorsten Groger told Reuters that the factory closures and job cuts "are in no way acceptable," labeling them "a deep stab in the heart of the hard-working VW workforce." Groger went on to warn of "corresponding consequences" should VW move forward with its plans, hinting at the potential for strikes in the coming months.

Similarly, fellow German automaker Mercedes-Benz also announced plans to cut costs on October 25, citing its own struggles to sell cars in China. According to Bloomberg, the company's gauge for profitability dipped to 4.7% in Q3 of 2024, well under Mercedes-Benz's target of 8%. That figure is the lowest the automaker has seen since Q2 of 2020, with Q2 revenue for 2024 falling by 7% year-over-year.