**Volkswagen to Close Production Plants in Germany Amidst Economic Downturn**

In a historic move, Volkswagen has decided to close production sites within Germany for the first time in its 87-year history. This decision marks a significant shift for the car manufacturing giant, which has traditionally operated a large portion of its production within its home market. The development was reported by Daniela Cavallo, the chairwoman of Volkswagen’s works council, during an announcement to employees in Wolfsburg.

Volkswagen plans to shutter at least three of its German plants and scale down operations at all remaining facilities. This downsizing effort might result in the loss of tens of thousands of jobs, with entire departments potentially being closed or moved abroad. The decision to cancel a 1994 agreement last month, which had protected the company’s workers from layoffs until 2029, has paved the way for these reductions. The retraction of this agreement will allow for business-related layoffs starting mid-2025.

Facing stiff competition from electric vehicle leaders like Tesla and China's BYD, Volkswagen’s slow investment in electric vehicle technology has placed the company at a disadvantage. With a nearly 20 percent drop in sales in the Chinese market during the first half of 2024, the company is feeling significant financial pressure. Volkswagen, which has considerable investments in China, views the plant closures as a necessary strategy to address its financial shortfall.

Germany’s economy, already struggling and anticipated to shrink for the second consecutive year, will likely feel the broader impacts of Volkswagen's plant closure. This economic situation is expected to become a central topic in the upcoming federal election, scheduled for less than a year from now. In response to these mounting economic challenges, German Chancellor Olaf Scholz is organizing an industry summit at the chancellery on Tuesday. The meeting with labor union leaders and executives from some of Germany’s largest companies aims to develop a plan to rejuvenate the nation’s economy.