After many warnings regarding Volkswagen’s financial situation, the car giant has decided to close at least three plants in their home country, cutting thousands of jobs, and decreasing pay by 10% for the remaining staff. It will be the first time the company closes a plant in Germany in its entire 87-year history.

Volkswagen will also downsize some remaining plants, according to a statement from the company’s representatives. This will lead to the outsourcing of some tasks and whole divisions.

Thomas Schaefer, Volkswagen passenger cars CEO, says the company “still handle[s] many tasks internally that the competition has already outsourced more cost-effectively.”

This has caused major backlash from the country's powerful unions, with whom the company has a decades-old agreement to protect jobs and workers. General Works Council Chairman Daniela Cavallo said it was the “plan of Germany’s largest industrial group to start to sell-off in its home country,” at VW’s main plant in Wolfsburg.

The automotive giant has ten plants in Germany, where it employs close to 300,000 people.

Cavallo said that since VW’s Board of Management “failed to provide us with the targets for the VW core brand” the cuts couldn’t be justified. She also warned that the company would move production abroad.

Schafer said the company has to address the “root of the problems: we are not productive enough at our German sites and our factory costs are currently 25 to 50 percent above the target. This means that some of our German plants are twice as expensive as our competitors.”

The decision comes only weeks after the EU voted in favour of tariffs on Chinese electric vehicles, with Germany voting against. Volkswagen had urged German leaders to vote against the tariffs, arguing that they did not improve the competitiveness of their auto industry and that they were “the wrong approach,” according to a spokesperson.

German car manufacturers warned that the tariffs would be “fatal” for the auto industry. The industry is heavily dependent on the Chinese market, which increased fears of retaliation from Beijing.

In April, Volkswagen announced that they would invest €2.5b ($2.7b) into the expansion of its production and innovation hub in Hefei, China.

"As Volkswagen closes plants in Germany, where is production headed? " was originally created and published by Investment Monitor, a GlobalData owned brand.

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