Volkswagen, Europe's largest car manufacturer, has announced significant operational changes in Germany, including plans to cut over 35,000 jobs and reduce production capacity by approximately a quarter.

This restructuring deal, finalized on December 20, 2024, aims to reduce costs while avoiding factory closures amid ongoing labor negotiations.

As part of the cost-saving measures, employees will forgo wage increases and bonuses, contributing to an annual reduction of labor costs by €1.5 billion.

While specific details regarding management pay cuts were not disclosed during the announcement, the IG Metall union is advocating for greater sacrifices from the executive board.

Union representatives expect that the pay cuts for top executives will exceed the 10% reduction imposed on managers.

The union anticipates that the board's concessions should surpass those of the management team.

Despite the agreement, analysts have criticized the measures for lacking the necessary urgency to adapt to rapid industry changes.

Volkswagen is facing a financial crisis due to intense competition from Chinese manufacturers, which has led to significant strikes involving approximately 100,000 workers.

After extensive negotiations lasting 70 hours, union leaders described the outcome as a 'Christmas miracle,' as it helped avoid immediate factory closures and layoffs.

Management bonuses will be cut, with salary reductions of 10% in 2025 and 2026, followed by further reductions of 8%, 6%, and 5% in the subsequent three years, affecting about 4,000 managers.

CEO Oliver Blume has indicated that both the board and management will participate 'disproportionately' in the cost-saving measures.

A Betriebsvereinbarung (works agreement) detailing these changes has reportedly been drafted, but Volkswagen has not commented on specifics until finalized.