By Volkswagen Group (ETR: VOW3) is in focus this morning after its workers announced a “warning strike” in Germany.
On Monday, the automaker’s employees at nine of its nationwide car and component facilities paused work citing potential factory shutdowns and changes to labour agreements.
“If necessary, this will be the harshest wage dispute ever seen at Volkswagen,” as per Thorsten Gröger – chief negotiator of the Europe’s largest industrial union IG Metall.
Volkswagen stock is in the red at writing.
Is Volkswagen to blame for the strikes?
Volkswagen has already had three sittings with the union and its works council – none of which ended in a tentative agreement.
The automotive giant is scheduled for further talks with its employees in the coming weeks.
How long does the conflict last and how much does it escalate depends on how open VW is to listen to its workers, as per IG Metall.
The metalworkers’ union, in fact, blamed Volkswagen for the strike saying “we didn’t want it, but we’ll lead it as engaged as needed” in its statement today.
In October, Volkswagen announced plans of a massive overhaul that it said will include tens of thousands of layoffs and closures of at least three factories in Germany.
The automaker scrapped its employment protection agreement this year as well after keeping it in place for about three decades.
The ongoing issues with its staff in its homeland have weighed rather significantly on the company’s share price.
VW stock has lost more than 30% since mid-June.
What broader strikes could mean for VW stock
Volkswagen continues to hope for constructive dialogue aimed at finding a “sustainable and mutually supported solution” with its workers later this month.
The company “respects the right of workers to participate in a warning strike” as well, according to a VW representative.
The last time Volkswagen faced a major strike was back in 2018, when as many as 50,000 of its employees protested against proposed pay cuts and potential factory closures.
Volkswagen stock has been losing in recent months because of the uncertainty – investors are not sure how long this conflict could last.
Plus, worker strikes could end up costing billions to an automaker, that’s what they learned from the examples of Ford and General Motors last year.
The possibility of labour strikes was part of the reason why analysts at RBC Capital downgraded VW stock to sector perform in November.
Note that Volkswagen failed to meet experts’ forecast in its latest reported quarter as well.
The German automaker saw its revenue remain unchanged on a year-over-year basis as per-share earnings tanked a more than expected 67% to €3.34 ($3.51) due to higher costs and lower demand amidst intense competition in fiscal Q3.
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