Volkswagen has reached an agreement with IG Metall that is intended to prevent factory closures in Germany and immediate forced layoffs.
However, both sides have agreed to cut more than 35,000 jobs across the country in a “socially responsible” manner by 2030 to save around 15 billion euros (12.4 billion pounds).
Germany’s largest carmaker had previously warned that it may have to close plants in the country for the first time to cut costs.
After lengthy negotiations that began in September, the union said on Friday that the two had managed to “find a solution” that would save jobs and enable future investments.
VW is considering closing up to three factories in Germany and has asked its workforce to accept a 10% pay cut.
At that time, the union demanded a 7% increase.
Although the agreement also calls for a reduction in production capacity at all plants, it was celebrated by union leaders.
“No location will be closed, no one will be laid off for operational reasons and our company collective agreement will be secured in the long term,” said IG Metall works council leader Daniela Cavallo.
“We have found a rock-solid solution under the most difficult economic conditions,” she added.
The reduction of 35,000 jobs by 2030 is to be achieved through various solutions such as offering an early retirement scheme.
As part of the agreement, a previously agreed 5% wage increase in 2025 and 2026 will also be suspended.
The union said this would help “support transformation” at the company.
In Germany, too, the number of training positions offered annually will be reduced from 1,400 to 600 from 2026 and relocation of production to Mexico is being considered.
The company is also examining alternative options for the Dresden and Osnabrück locations.
But Oliver Blume, VW’s chief executive, said in a statement that the agreement was “an important signal for the future viability of the Volkswagen brand.”
Factory closures in Germany would have been unprecedented in the manufacturer’s history.
VW, like other German automakers, has been hit hard by a decline in demand for its cars in China, a previously lucrative market.
At the same time, Chinese brands are penetrating Europe, increasing competition for sales.
As part of the talks, around 100,000 workers took part in short, so-called “warning strikes” at sites across the country to put pressure on management.
The latest round of negotiations began on Monday, with negotiators apparently determined to settle the matter before Christmas.
Chancellor Olaf Scholz also welcomed the announcement and described it as a “good, socially acceptable solution”.
