The $348 billion German carmaking giant is in the midst of a major cost-cutting drive designed to increase competitiveness, with a crucial labor agreement struck with its work council in December regarded as a crucial first step toward those ambitions.

Volkswagen agreed a monumental deal with the powerful IG Metall union in December, which prevented the closure of German factories while reducing production capacity in those factories. The company also walked back plans for compulsory redundancies and a proposed 10% pay cut.  

The carmaker is now readying itself for a fresh battle with employees under these new rules of engagement, this time on the productivity front.

Volkswagen’s CFO, Arno Antlitz, told investors in New York that the carmaker was now focused on increasing the number of cars each worker produced as a key measure of productivity, Reuters reported.

Targeting productivity improvements followed two other targets Antlitz says the carmaker achieved in its December labor agreement: the reduction of high labor costs and removal of capacity underutilization.  

Antlitz held the carrot of extra investment over the automaker’s employees, threatening to turn off the taps in places where workers weren’t upping their output.

“We will only invest in competitive plants. Germany cannot be an exception,” Antlitz reportedly said.

A representative for Volkswagen didn’t immediately respond to a request for comment.

Volkswagen’s factories

Volkswagen’s extensive negotiations with unions, which went through five rounds before coming to a conclusion, resulted in a plan for 35,000 future job reductions that would focus on early retirement above compulsory redundancies.

The other key measure was the repurposing and reduction in output of Volkswagen’s factories in place of all-out closures and associated job cuts. 

The group said it would half the number of assembly lines at its Wolfsburg headquarters from four to two to account for falling demand for its cars. Production at its Dresden facility is set to end by 2025.

Volkswagen said it was exploring options to repurpose its Osnabrueck site, including finding a potential buyer. One reportedly interested party is a growing rival to Volkswagen’s ambitions. 

In a separate article, Reuters reported that China had emerged as a prospective buyer of Volkswagen’s unwanted factories.

Chinese carmakers have made headways into the European market with cheap EVs, and reportedly view owning a factory in Germany as a vital means of increasing their influence in the country, which is the heartbeat of Europe’s automotive sector.

The purchase of German plants would also help the automaker navigate fresh tariffs implemented on the import of Chinese EVs last year.

The progress of a potential bid is likely to hinge on the outcome of February’s national elections, which is likely to see the right-wing AfD make significant headway.

On Tuesday, Volkswagen revealed deliveries to China had plunged by 10% amid falling consumer sentiment and an onslaught of cheap domestic competitors including BYD.