Why a Longer Working Week Won’t Fix Volkswagen’s Deeper Crisis in Germany
Volkswagen’s escalating standoff with its own workforce has revived a debate that Germany’s auto industry has avoided for decades: whether the country’s famous 35-hour working week is quietly pricing German-made cars out of the market. With a confrontation brewing between management and unions over Volkswagen’s restructuring plans amid wider efforts to protect the future of German auto production, the conversation has landed squarely on an industry standard that has stood largely untouched since the 1990s. Politicians, executives and economists are now pulling in different directions on whether asking employees to simply work more hours could meaningfully change the automaker’s fortunes.
The 35-hour week is the full-time standard for many production workers in Germany’s metalworking industry, including large parts of the auto sector, and it didn’t appear by accident. It emerged from collective bargaining agreements negotiated by the IG Metall union in the 1980s and 1990s, following a series of hard-fought strikes, including a seven-week walkout by the West German metal industry in 1984 that unions organized under the slogan “more time to live, love, laugh.” For decades that arrangement was treated as settled labor policy rather than a live economic controversy. That has changed now that Volkswagen finds itself in what its own chief executive has described as a situation more critical than the company has faced in years.
The pressure to reconsider the 35-hour week is coming from multiple directions at once, and not only from inside Volkswagen’s boardroom. In Saxony, where Volkswagen’s Zwickau plant is threatened with closure, state premier Michael Kretschmer said a 40-hour week should be seriously considered, pointing approvingly to Mercedes-Benz, where management has been pushing its own unions to accept longer hours for the same pay. Kretschmer has been unusually direct about the state of domestic manufacturing, acknowledging plainly that production in Germany has simply become too expensive to sustain at current cost levels. He isn’t alone in that view. Chancellor Friedrich Merz, a fellow conservative, has also warned that the 35-hour week is hurting German competitiveness on the global stage, even as both men acknowledge that any actual change to labor contracts has to be negotiated directly between unions and employers rather than imposed by government decree.
The numbers explaining why this argument has gained traction are genuinely striking. According to Oliver Wyman’s Harbour Report, which analyzed more than 250 vehicle assembly plants worldwide, Germany carries some of the highest automotive labor costs on the planet, averaging around $3,307 per vehicle compared with $955 in Spain and just $597 in China. The report’s authors attribute the gap primarily to Germany’s strong unions and strict labor regulations rather than any difference in worker productivity or skill. That cost differential helps explain why domestic car production in Germany has fallen by more than a quarter over the past decade, and industry analysts expect that decline to continue without some structural shift in how German plants are staffed and scheduled.
Auto industry analyst Ferdinand Dudenhoeffer has run the numbers on what extending the work week specifically could accomplish. Using an example hourly labor cost of 65 euros, he calculates that increasing the standard working week to 40 hours for the same pay could reduce labor costs by roughly 13 percent, which would meaningfully help German plants maintain or even expand current production levels. That’s a real number, and it’s the strongest argument in favor of the proposal currently circulating among conservative politicians and some industry executives who see the 35-hour week as an increasingly unaffordable relic.
But the counterargument carried just as much weight among economists who’ve looked closely at Volkswagen’s actual problems. ING chief economist Carsten Brzeski has pointed out that five additional contractual hours a week wouldn’t come close to closing the structural cost gap separating Germany from lower-cost manufacturing hubs like China, where the labor cost per vehicle sits at a small fraction of the German figure even before accounting for other advantages Chinese manufacturers enjoy in battery supply chains and vehicle design cycles. A 13 percent reduction in labor costs, however welcome, still leaves German-made cars dramatically more expensive to produce than their Chinese-built competitors, meaning the working week alone was never going to be the fix some politicians are presenting it as.
There’s also a demand-side problem that longer hours simply cannot touch. Volkswagen isn’t just fighting a cost battle. It’s fighting a battle for buyers, and unions along with several industry observers have been blunt that the company’s struggles won’t be solved by producing more of something people aren’t buying in sufficient numbers. Reporting on leaked supervisory board documents indicates Volkswagen management has quietly proposed shutting down four major German manufacturing plants, Emden, Zwickau, Hanover and Audi’s Neckarsulm site, sometime between 2031 and 2034, as the company scrambles to cut costs across an increasingly complex global operation. Union leaders have pushed back hard, warning that roughly 140,000 jobs worldwide could ultimately be at risk if the proposed restructuring proceeds, while chief executive Oliver Blume has argued that the company’s current trajectory makes continued investment in future models financially unworkable given persistent overcapacity and the added weight of US tariffs on imported vehicles.
Blume has already made his position clear in direct conversations with the workforce. During a visit to the Zwickau plant, part of a broader series of crisis meetings held across German sites, he told employees that no final decision on closures has been made, while reiterating that there is currently no viable capacity plan for Zwickau, Hanover, Emden or Neckarsulm through the 2030s. Kretschmer, for his part, has struck a more optimistic tone specifically about Zwickau, calling it the most efficient Volkswagen plant in the country and expressing hope that it can avoid the fate facing the other three sites. That split between cautious corporate messaging and more assertive political rhetoric captures just how unresolved the underlying dispute remains.
What makes this moment different from Volkswagen’s past labor standoffs is the sheer range of pressures converging at once. The company is negotiating with unions over job security commitments that already run through 2030, wrestling with a genuine falloff in consumer demand for its vehicles in key markets, absorbing new tariff costs on trade with the United States, and trying to fund an expensive transition to electric vehicles all at the same time. Extending the working week might shave a meaningful percentage off labor costs, and that’s not nothing for a company under this much financial strain. But treating it as the single lever that rescues Volkswagen’s German operations misreads the scale of what the company is actually up against, particularly against a Chinese manufacturing base where labor costs remain a fraction of Germany’s even after accounting for every hour German workers might reasonably be asked to add.
