Volkswagen Group is reportedly considering a massive restructuring that could involve cutting up to 100,000 jobs worldwide and closing four German factories. This move would represent the largest overhaul in the automotive industry's history. The affected factories, including Zwickau, Emden, Hanover, and Audi's Neckarsulm site, reportedly put over 45,000 jobs at risk, adding to the 50,000 cuts already agreed upon with unions in late 2024.
CEO Oliver Blume informed employees that the company's costs are approximately 20% higher than competitors, necessitating significant reductions to achieve a "competitive level." Given that staff costs account for half of their overheads, a theoretical calculation without changes in labor costs would imply a loss of around 50,000 jobs. This proposed figure is in addition to the 50,000 jobs already being cut, bringing the total potential job reductions to 100,000.
The carmaker has faced sharp declines in profits, with operating profit dropping from €22.6 billion ($25.8 billion) in 2023 to €8.9 billion last year. This downturn is attributed to falling sales in key markets like China, where sales were down 26% in the first six months of the year, and a more than 7% decline in the U.S., partly due to tariffs. Increased competition from Chinese brands, which offer new technologies at lower production costs, has further pressured Volkswagen's profit margins.
Industry analysts, according to Agence France Presse, suggest that the publicized figure of 100,000 job cuts might be a negotiating tactic, implying the final number could be lower. Both the powerful German trade union IG Metall and the state of Lower Saxony, a significant shareholder, have vowed to resist any such drastic measures, particularly plant closures. Volkswagen's supervisory board, which includes labor representatives, has been informed of these plans, which are expected to be discussed at an upcoming meeting.
In addition to job cuts, Volkswagen is reportedly planning to reduce investment by approximately 15% to just over €130 billion ($148 billion) over the next five years. There are also discussions about fundamentally restructuring the company, including potentially spinning off the core VW brand and parts operations into separate entities. Despite these aggressive plans, Volkswagen's shares were trading at 16-year lows on June 26, reflecting investor skepticism about the success of the overhaul given persistent weak sales.
