By Dominic Chopping


Volkswagen Group's chief executive warned staff that urgent measures are needed to secure the company's future amid heightened competition, price pressure and high labor costs.

In a speech to staff at the German auto giant's Wolfsburg headquarters, CEO Oliver Blume said the company has made good progress streamlining its operations and creating synergies while the design and quality of its cars has improved, but labor costs and capacity must now be reduced.

"The current situation is serious. New competitors are entering the market with unprecedented force. The price pressure is immense," he told workers on Wednesday.

"In addition, our labor costs in Germany have now become too high. That is why urgent measures are needed to secure Volkswagen's future."

Nearly 100,000 employees, around a third of the company's total German workforce, staged walk-outs across nine factories in the country earlier this week to push back against plans for potential factory closures and sweeping cuts to jobs and pay.

Volkswagen has put forward plans to cut workers' pay by 10%. According to the head of Volkswagen's works council, Daniela Cavallo, the company also aims to shut at least three factories in Germany and lay off tens of thousands of staff.

Negotiations between worker representatives and the company over how to move forward with cost cuts are set for Dec. 9, after the latest round of talks ended last week without agreement.

The company's work council has proposed measures relating to wages and bonuses that it says would save 1.5 billion euros ($1.58 billion) and avert factory closures and redundancies. CEO Blume said that although the proposal is a positive step, it isn't enough to defend the company's future.

Works council chief Cavallo also spoke at the meeting on Wednesday, telling the roughly 20,000 workers in attendance that while she acknowledges there are problems at the company and in the industry as a whole, a solution involving factory closures, mass layoffs and pay cuts is out of the question.

Appealing to the Volkswagen board to ease their demands, she said a resolution will only come when both sides make compromises and concessions.

"We want to bring this to a good end before Christmas," she told workers.


Write to Dominic Chopping at dominic.chopping@wsj.com


(END) Dow Jones Newswires

12-04-24 0745ET