Volkswagen AG is facing mounting pressure from high operational costs and competition from Chinese automakers, leading to a significant clash with Germany's powerful IG Metall union. The union had proposed a cost-saving plan amounting to 1.5 billion euros, which included measures such as forgoing bonuses for the years 2025 and 2026. However, Volkswagen has rejected these proposals, stating that they would not provide sustainable financial relief in the long term.

The automaker's decision comes just days before planned walkouts, which are intended to prevent unprecedented plant closures. Volkswagen has argued that it needs to implement a 10% wage cut to reduce costs and maintain its market share amidst declining demand in Europe and fierce competition from China. The company is also considering plant closures in Germany, a move that would mark a significant shift in its 87-year history.

The union, on the other hand, has reiterated its commitment to the proposed cost-cutting measures and has criticized Volkswagen for not offering a viable plan for its employees. IG Metall has warned that strikes could begin as early as next week, potentially escalating into 24-hour or unlimited strikes if a new labor agreement is not reached by December 9. These strikes could severely impact Volkswagen's production at a time when the company is already struggling with declining deliveries and profits.

The ongoing negotiations highlight the broader challenges Volkswagen faces, including a complex organizational structure, misjudged investments, and weak demand in its home market. As the situation unfolds, both parties remain at an impasse, with labor representatives and management set to meet again in December to continue discussions.