By SCM Business Desk
FRANKFURT — Volkswagen AG is considering the most radical restructuring in its nearly century-long history, drawn up by a deepening financial crisis and an aggressive onslaught of low-cost electric vehicles from Chinese competitors.
In a stark management board meeting, Chief Executive Oliver Blume warned executives that “never has the risk situation been so high” for the industrial crown jewel of Germany.
The internal presentation, first reported by Germany’s Manager Magazin, outlines a proposal to eliminate up to 100,000 jobs globally—amounting to roughly one in six roles across the company’s 657,000-strong workforce.
Crucially, the plan puts four major German manufacturing plants on the chopping block. The emergency measures follow a devastating financial performance that has sent shockwaves through Wolfsburg.
Volkswagen’s core operating profit plunged by more than 50% over the last fiscal year, squeezed tightly by an unfavorable macroeconomic environment, structural overhead costs, and a collapse in consumer demand across key international markets.
For decades, Volkswagen relied on China as its primary engine of profitability. However, nimble domestic Chinese automakers like BYD have aggressively captured the mass market with highly advanced, affordable electric vehicles.
Concurrently, European and American automotive segments have grown increasingly hostile. The introduction of 25% U.S. tariffs on European vehicle imports has severely curtailed North American growth margins, while ongoing geopolitical volatility in the Middle East has driven up industrial energy costs at home.
Even Volkswagen’s premium margins have evaporated. Its luxury subsidiary, Porsche, suffered a near-total wipeout of its operating profit after the brand was forced to walk back its ambitious EV transition schedule due to sluggish consumer adoption. Group operating margins dropped to a razor-thin 2.8%, down from 5.9% the year prior.
”We are seeing how volatile and fragile our world is,” Chief Executive Blume told shareholders in a recent communication.
“The Executive Board has repeatedly emphasized that our current business model no longer works for all brands in its present form.”
The proposed blueprint marks a dramatic escalation from a previous, hard-fought labor agreement reached in late 2024, which targeted a more gradual reduction of 50,000 jobs through early retirement and natural attrition.
The new plan effectively doubles those staff cuts and shatters a long-standing corporate pledge to avoid domestic factory closures this decade.
According to sources familiar with the matter, production could eventually cease entirely at four pivotal facilities once current vehicle lifecycles are phased out:
Zwickau: The company’s flagship electric vehicle assembly site.
Emden: The production hub for the ID.4 and ID.7 electric models.
Hanover: A major commercial vehicles plant.
Neckarsulm: A high-overhead facility operated by VW’s Audi luxury brand. In addition to the closures, corporate leadership is evaluating a total separation of its component manufacturing plants and a potential corporate carve-out of the core namesake Volkswagen passenger car brand to isolate it from the group’s wider liabilities.
Any attempt to execute these cuts will trigger a fierce political and legal war within Germany. Volkswagen operates under a unique governance structure where labor unions and regional politicians hold massive institutional power.
Under the “VW Law,” the German state of Lower Saxony holds a 20% voting stake and traditionally sides with labor groups.
Furthermore, representatives from the IG Metall industrial union and the company’s internal works council occupy half the seats on Volkswagen’s supervisory board, giving them a structural veto over major corporate strategy.
Daniela Cavallo, chairwoman of the General Works Council, along with leadership from IG Metall, issued a defiant joint statement warning that the proposals “unsettle our workforce” and vow to “oppose them with all our might.”
Yet, industry analysts note that the scale of the financial erosion may leave workers with very little leverage. Volkswagen’s current market valuation has fallen to roughly $37.6 billion—substantially less than the combined value of its majority stakes in Porsche and its heavy truck division, Traton.
”Volkswagen has suffered from years of structural neglect due to the stranglehold of regional government and trade unions,” said Matthias Schmidt, an independent automotive analyst.
“Now, the sudden, aggressive competition from Chinese manufacturers is hitting the German giant hardest, and management has little choice but to challenge the status quo.”
1. The Core Paradox of Volkswagen’s Restructuring
To understand why closing Zwickau and Emden is so shocking, one must look at VW’s recent history. Zwickau was heavily marketed as the birthplace of Volkswagen’s electric future—a multi-billion-euro conversion from internal combustion engines to a dedicated EV plant. Shutting it down or consolidating it signals that VW’s early EV gamble has stalled because European consumers are not buying Western EVs at the expected volumes, while Chinese imports are undercutting them significantly on price.
2. The Power Gridlock of the “VW Law”
Unlike typical publicly traded corporations, Volkswagen cannot simply close a factory by executive decree. Passed in 1960, Germany’s “VW Law” protects the company from hostile takeovers and ensures local government oversight. Because the state of Lower Saxony and union representatives control a blocking majority on the supervisory board, cost-cutting measures historically get heavily diluted.
Oliver Blume’s aggressive posturing is a direct challenge to this decades-old system, signaling that the company faces an existential crisis severe enough to break traditional German industrial consensus.
3. The Broader German Industrial Crisis
Volkswagen does not exist in a vacuum. Its crisis reflects a wider decay across Germany’s industrial base. Fellow automotive titans Mercedes-Benz and BMW have similarly issued steep profit warnings, brought on by high domestic energy prices resulting from shifting geopolitical alliances and structural over-reliance on the Chinese market.
The reality facing Wolfsburg is a microcosm of a nation struggling to transition from traditional mechanical engineering to software-defined, battery-powered supply chains.