Volkswagen (VWAGY) (DE:VOW3) could face big disruptions next week as more than a third of its German workers may stop work. Talks between the company and the IG Metall union broke down over Volkswagen’s plans to cut costs by closing three factories, laying off thousands of workers, and reducing wages by 10%. These measures are aimed at staying competitive with cheaper Chinese imports and slower overall EV demand.
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The IG Metall union is demanding a 7% pay raise and the return of collective bargaining agreements, but Volkswagen says this isn’t possible due to its financial struggles. The company reported just a 2.1% profit margin for its Volkswagen brand last quarter and warned it won’t be able to fund future projects if costs aren’t cut.
In response, the union plans to start “warning strikes,” where workers stop for a few hours each day, disrupting production and putting pressure on the company. If no deal is reached, the strikes could escalate and cause further delays.
Volkswagen Is Also Struggling in China
In another sign that Volkswagen is struggling, the firm sold its plant in Xinjiang, China. This was due to “economic reasons” and the growing shift toward electric vehicles within the country, unlike the slowing demand in the rest of the world. The plant, which is owned through a partnership with China’s SAIC Motor, hasn’t made gas-powered cars since 2019 and has been used as a distribution center. Volkswagen says it needs to focus on EV production to keep up with the rising demand and tougher competition.
However, Volkswagen is struggling to compete in China where local automakers are dominating EV sales. With electric cars expected to make up 45% of car sales in China this year, Volkswagen’s decision highlights the growing pressure to adapt to a rapidly changing market.
Is Volkswagen Stock a Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on Volkswagen stock based on nine Buys, three Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After an 18% rally in its share price over the past year, the average Volkswagen price target of €141.58 per share implies 75.9% upside potential.
