Berlin:

Crisis-hit auto giant Volkswagen said Friday it planned to cut 35,000 jobs by 2030 in Germany after reaching an agreement with unions on a drastic cost-cutting plan.

The deal, reached at the end of marathon negotiations with labour representatives, will save Europe’s largest carmaker around four billion euros ($4.2 billion) a year,  the German group said.

But the powerful IG Metall union hailed the agreement, which came just in time for Christmas and put an end to rolling strikes, as it avoided forced redundancies and plant closures.

Volkswagen had originally said it was considering shuttering production sites in Germany, which would have been an unprecedented move in the 87-year history of the carmaker.

The situation at the eponymous mass-market Volkswagen brand, which employs around 120,000 people in Germany, was “serious” and demanded urgent action, management argued.

VW has struggled with the transition to electric vehicles as it battles rising competition in China from local manufacturers, such as BYD and Geely.

The 10-brand group — which also owns Audi, Porsche and Skoda — has said it also has to contend with falling demand and elevated labour and production costs in Europe.

– Production moves –

“There will be no plant closures,” negotiator Thorsten Groeger from the IG Metall union told a press conference.

The agreement would however see production stop at Volkswagen’s smallest factory in Dresden at the end of 2025.

An “alternative overall concept” would be found for the site, which employs around 300 people, with Volkswagen’s continued involvement, unions said.

At VW’s plant in Osnabrueck, where some 2,300 people work, production would continue until mid-2027 before “other uses” for the site were found, the carmaker said.

Meanwhile, Volkswagen said it would also relocate the production of its popular Golf model from its flagship site in Wolfsburg, Germany, to a factory in Mexico.

All in all, the carmaker had “reduced the technical capacity at the German sites by over 700,000” vehicles, VW brand CEO Thomas Schaefer said at a press conference in Berlin.

The agreement with unions is “bringing development and labour costs to a competitive level”, Schaefer said.

“These are tough decisions, but also important decisions for the future”.

Of the planned four billion euros in savings, 1.5 billion would come from lower labour costs and a progressive reduction in the group’s headcount, Volkswagen said.

The deal foresaw a pay freeze for employees in 2025 and 2026, and the spreading of previously agreed bonuses over several years.

– German struggles –

Volkswagen’s perilous financial position was highlighted when it reported a 64 percent plunge in third-quarter profit to 1.58 billion euros in October.

The struggles at Volkswagen have been symbolic of a wider malaise in Europe’s biggest economy, which has been hit by high energy prices and is drifting towards its second straight year of contraction.

The risk that the crisis at one of Germany’s most iconic companies could lead to mass layoffs had drawn politicians into the debate ahead of early elections on February 23.

Berlin and the Lower Saxony state government, which holds 20 percent of the voting shares in Volkswagen, have leant on the group to find a solution.

Chancellor Olaf Scholz of the Social Democrats, who faces an uphill battle to hold on to his job in the election, warned recently that factory closures “would not be the right way”.

“Precisely because the bad decisions of management have contributed to the situation, that would not be ok,” said Scholz, whose party is trailing in the polls behind the conservative opposition.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

New Delhi:

India has issued a notice to German automaker Volkswagen for allegedly evading $1.4 billion in taxes by “wilfully” paying lesser import tax on components for its Audi, VW and Skoda cars, a document shows, in what is one of the biggest such demands.

A notice dated Sept. 30 says Volkswagen used to import “almost the entire” car in unassembled condition – which attracts a 30-35% import tax in India under rules for CKD, or completely knocked down units, but evaded levies by “mis-declaring and mis-classifying” those imports as “individual parts”, paying just a 5-15% duty.

Such imports were made by Volkswagen’s India unit, Skoda Auto Volkswagen India, for its models including the Skoda Superb and Kodiaq, luxury cars like Audi A4 and Q5, and VW’s Tiguan SUV. Different shipment consignments were used to evade detection and “willfully evade payment” of higher taxes, the Indian investigation found.

“This logistical arrangement is an artificial arrangement … operating structure is nothing but a ploy to clear the goods without the payment of the applicable duty,” said the 95-page notice by the Office of the Commissioner of Customs in Maharashtra, which is not public but was seen by Reuters.

Since 2012, Volkswagen’s India unit should have paid import taxes and several other related levies of about $2.35 billion to the Indian government, but paid only $981 million, amounting to a shortfall of $1.36 billion, the authority said.

In a statement, Skoda Auto Volkswagen India said it is a “responsible organization, fully complying with all global and local laws and regulations. We are analyzing the notice and extending our full cooperation to the authorities.”

The notice asks to respond within 30 days, but Volkswagen didn’t comment if it has done so or not.

India’s finance ministry and the customs department did not respond to Reuters queries.

The so-called “show cause notice” issued by the government authority asks Volkswagen’s local unit to explain why its alleged tax evasion should not attract penalties and interests under Indian laws, over and above the $1.4 billion evaded duties.

A government official who spoke on condition of anonymity said the penalty typically in such cases, if the company is found guilty, could go as high as 100% of the amount evaded, which could force the company to pay up about $2.8 billion in total.

High taxes and prolonged legal disputes have often been a sore point for foreign companies in India.

Electric vehicle maker Tesla, for example, has for years complained about high taxes on imported cars and Vodafone has fought cases related to back taxes. Chinese automaker BYD also faces an ongoing Indian tax investigation for underpaying taxes of roughly $9 million on imports.

BULK CAR ORDERS, USE OF SOFTWARE

Volkswagen is a tiny player overall in India’s 4 million units a year car market and has struggled to boost sales. The case can increase its headaches in India, where its Audi brand already lags competitors in the luxury segment like Mercedes and BMW.

Indian investigators said in their notice that Mercedes was following the necessary rules to pay a 30% tax by importing the CKD units of their cars, and not separate the individual parts.

Inspectors searched three of Volkswagen India’s facilities in 2022, including the two factories in Maharashtra. Documents related to component imports and email backup of top executives were seized at the time then.

The company’s India Managing Director, Piyush Arora, was questioned last year and asked “why all the parts required to assemble a car are not shipped together”, but “he was not able to answer this question,” the investigators said in the notice.

Arora did not respond to a Reuters request for comment.

MODUS OPERANDI

The Indian notice, based on review of the company’s internal software, said Volkswagen India regularly placed bulk orders for cars through an internal software which connected it to suppliers in Czech Republic, Mexico, Germany and other nations.

After the order was placed, the software broke it down into “main components/parts”, roughly 700-1,500 for each vehicle depending on the model.

Then, the supplies started.

The car parts were packed abroad in different containers within a span of three to seven consecutive days under multiple invoices, and then reached the Indian port roughly at the same time, Indian authorities alleged.

“This appears to have been done to pay lesser duties applicable on these individual parts,” the notice said.

Volkswagen told investigators it was using such a route for “efficiency of operations”, but the argument was dismissed.

“Logistics is a very small and rather least significant step of the whole process … (Skoda-Volkswagen India) is not a logistics company,” the notice said.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

Volkswagen AG is considering unprecedented factory closures in Germany in a bid for deeper cutbacks, delivering another blow to Chancellor Olaf Scholz’s government.

The potential measures, targeting its main passenger car brand as well as other group operations, also include trying to end the company’s pact with unions to keep jobs secure until 2029, the company said Monday.  

Any shutdowns would mark the first closures in Germany during the company’s 87-year history, setting VW up for a clash with powerful unions.

“The economic environment has become even tougher and new players are pushing into Europe,” VW Chief Executive Officer Oliver Blume said in a statement. “Germany as a business location is falling further behind in terms of competitiveness.”

A full-blown labor dispute would be a major test for the CEO – who also heads up the Porsche sports car brand – after union clashes felled a number of his VW predecessors. The company has struggled to cut costs at its namesake passenger brand where profit margins have long lagged, with efforts becoming harder amid a sputtering transition to EVs and a consumer spending slowdown.

Works council head Daniela Cavallo said VW’s management had failed after meetings detailed that the company’s core brand, making the Golf and Tiguan models, threatened to become loss-making, according to a separate statement. The company is plotting to close at least one larger carmaking factory and one component site in Germany, it said, alongside abolishing wage agreements.

VW employs about 650,000 workers globally, almost 300,000 of which are in Germany. Half the seats on the company’s supervisory board are held by labor representatives, and the German state of Lower Saxony – which owns a 20% stake – often sides with trade union bodies.

Previous clashes ended or shortened the tenures of top executives including former CEO Bernd Pischetsrieder, ex-VW brand chief Wolfgang Bernhard and more Herbert Diess, Blume’s predecessor as CEO. All three tried to push through efficiencies particularly at VW’s domestic German operations.
 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Volkswagen and Mahindra & Mahindra Ltd have signed a supply agreement on the use of key electric components of the German carmaker’s open platform for electric vehicles (EVs), the companies said in a statement on Friday.

Mahindra plans to use certain platform components, as well as Volkswagen’s unified battery cell, for its own electric platform, called INGLO, the companies said.

Mahindra shares climbed as much as 5.6% to a record high in Mumbai trading after the news.

The Indian company will be the first external partner to use the unified cell, a new cell technology that Volkswagen plans to use for 80% of its battery cells and promises will reduce costs by half.

Volkswagen said the agreement would run “over several years” and have a total volume of about 50 gigawatt hours of energy storage capacity over its lifetime.

The two companies were evaluating further opportunities for collaboration, the statement added.

Volkswagen has developed a modular, open vehicle platform for EVs, called MEB, which is used to build its cars and those of other group companies including Skoda and Audi. This also allows Volkswagen to be a supplier of electric technology and parts to other automakers.

The supply agreement was the first of its kind for Volkswagen – but the carmaker said last September that it was in talks with other players about similar deals, including manufacturers of cars with combustion engines in Asia who were considering producing cars for the European market via a Volkswagen collaboration.