German automotive big Volkswagen is bracing for a showdown with commerce unions shortly after it stated it cannot rule out shutting factories in its dwelling nation for the primary time in its practically 90-year historical past.

Volkswagen’s administration is anticipated to put out its plans earlier than about 18,000 employees at a city corridor assembly in Wolfsburg on Wednesday morning, amid hypothesis that the carmaker might push to shut websites in Osnabrueck in Decrease Saxony and Dresden in Saxony.

A spokesperson for Volkswagen was not instantly out there to remark when contacted by CNBC on Tuesday.

In a transfer that underlines the challenges dealing with Europe’s high legacy carmakers, Volkswagen warned on Monday that it will now not be capable of rule out plant closures in Germany.

The Wolfsburg-headquartered firm additionally stated it felt compelled to deliver an finish to its employment safety settlement — a job safety program that has been in place since 1994 — with a view to safe “urgently wanted structural changes for higher competitiveness within the brief time period.”

Volkswagen Group CEO Oliver Blume stated in a written assertion on Monday that the carmaker would want to “act decisively” with a view to future-proof the corporate.

“The European automotive {industry} is in a really demanding and severe scenario,” Blume stated.

“The financial surroundings grew to become even more durable, and new rivals are coming into the European market. As well as, Germany specifically as a producing location is falling additional behind when it comes to competitiveness,” he added.

Volkswagen stated that each one vital measures can be mentioned with the Basic Works Council — a bunch of elected employees members that symbolize the pursuits of an organization’s workforce — and with high German industrial union IG Metall. Each teams, which maintain vital affect on the firm, have been sharply essential of the proposals.

Daniela Cavallo of Volkswagen’s Basic Works Council stated that the faction would “struggle bitterly” towards the potential plant closure measures, whereas a spokesperson for IG Metall described the plan as one which “shakes the foundations of Volkswagen and poses a large risk to jobs and places.”

The downturn comes amid a troublesome financial surroundings for the carmaker and an inflow of recent rivals in Europe, as Volkswagen makes an attempt to outlive the transition to electric cars.

“The scenario is extraordinarily tense and can’t be resolved via easy cost-cutting measures,” VW model CEO Thomas Schäfer stated on Monday.

“This is the reason we wish to provoke discussions with worker representatives as quickly as potential to discover the chances for sustainably restructuring the model,” he added.

Volkswagen’s plans to contemplate unprecedented plant closures in Germany comes at a politically fraught time for Europe’s largest economic system. Led by Chancellor Olaf Scholz, the ruling three-way coalition in Berlin was dealt a heavy blow in regional votes over the weekend.

“The German automotive {industry} stands for globally profitable merchandise and improvements. It’s a central pillar for progress and prosperity in Germany,” a German authorities spokesperson advised CNBC by electronic mail, with out commenting particularly on Volkswagen’s deliberate measures.

“On the identical time, it’s presently in a difficult section of transformation in the direction of electromobility. This additionally requires the variation of conventional constructions and measures for higher competitiveness,” the spokesperson added, based on a Google translation.

“An in depth social partnership is a trademark of the German automotive {industry}. The Federal Authorities due to this fact appeals to the social companions concerned to proceed to fulfil this duty sooner or later.”

Thomas Besson, head of automotive analysis at Kepler Cheuvreux, stated the issues at Volkswagen mirror an “industry-wide story.”

“We’re seeing a serious fragmentation story of the worldwide automotive panorama,” Besson advised CNBC’s “Road Indicators Europe” on Tuesday.

“The scenario … can also be particular to Volkswagen, within the sense that they’ve put in place numerous ensures for employees,” he added.

— CNBC’s Annette Weisbach contributed to this report.