Volkswagen's board of directors has approved a significant cost-cutting initiative that will reduce the company's workforce by approximately 50,000 positions, cut its model lineup by half, and end automotive production at four German plants. The move is intended to counter intensifying low-cost competition, particularly from China, and address challenges posed by U.S. tariffs.
CEO Oliver Blume presented the plan, which faced opposition from employee representatives and the regional government of Lower Saxony, a stakeholder in the company. Blume stated the plan sends "a strong signal for the future of Volkswagen Group" and aims to make the company's brands "even more attractive, stronger and competitive."
The reduction in models is projected to increase volume per remaining model, thereby lowering fixed costs. The company cited excess production capacity of 500,000 vehicles in Europe. Production is set to cease at plants in Emden, Zwickau, Hanover, and Neckarsulm, though alternative uses for these facilities will be explored. The employee number adjustment includes management roles.
The plan also mandates "leaner leadership structures and shorter lines of decision."
Daniela Cavallo, chief employee representative, acknowledged the plan's necessity for the company's future success, stating that "associated undertakings coming only on the side of the employees" would not be the sole burden. Worker representatives hold half the seats on the board, and the governor of Lower Saxony, Olaf Lies, described the plan as "a shared path toward the necessary transformation" in response to "enormous" challenges.
Volkswagen, which employs around 650,000 people globally, experienced a 30% decrease in after-tax earnings in the first half of the year, partly due to declining sales in China. The Volkswagen Group includes brands such as Audi, Skoda, Porsche, and SEAT.