Volkswagen Faces Labor Cost Challenges in Germany

Volkswagen is facing significant challenges in Germany as it prepares for wage negotiations amid rising competition from cheaper Chinese models. An internal memo reveals that the company's labor costs as a percentage of sales are higher than those of major rivals, prompting unions to demand a 7% pay increase while VW threatens a 10% cut. Despite a decrease in global labor cost percentage from 18.2% in 2020 to 15.4% in 2023, VW's figures remain above those of BMW, Mercedes-Benz, and Stellantis. The works council indicates that labor costs in Germany average around 62 euros per hour, the highest in the automotive sector globally. Analysts note that VW's reliance on in-house production of components contributes to higher labor costs, which are becoming unsustainable in light of competitive pressures. The outcome of these negotiations could significantly impact VW's operational strategy in an increasingly challenging market.