Volkswagen launches inquiry into Changzhou supplier following mass graduate lay-offs

The firm launched an investigation following the lay-offs in Jiangsu province of over one hundred graduates a month after they were hired

After significant lay-offs by a key Chinese auto supplier in Changzhou city of Jiangsu province involving over a hundred new graduates sparked nationwide outrage and forced Volkswagen to launch an investigation, analysts note the episode could lead to an overhaul of corporate-governance practices across China’s enterprises.

At the centre of the controversy is Changzhou Xingyu Automotive Lighting System, China’s biggest manufacturer of auto lighting components by revenue, based in Jiangsu province. Its official website lists a roster of well-known clients including Volkswagen, BMW and BYD.

Beijing-based news outlet Caixin reported that the wave of dismissals had begun in early August. Xingyu reportedly summoned a group of fresh graduate hires over a weekend – employees who had joined the firm only one month earlier – and told them headcount adjustments were necessary amid “soft business performance”.

The company presented two options, according to the Caixin report. Graduates could sign a voluntary exit agreement citing “personal reasons” in return for half a month’s salary as compensation.

Alternatively, they could stay on the payroll but be reassigned to lower-paid assembly-line roles, though the graduates were recruited to the company for research and development, engineering or management trainee roles.

According to the Changzhou Municipal Human Resources and Social Security Bureau, Xingyu hired a total of 440 fresh graduates, reaching negotiated terminations of employment with 107 of them.