Volkswagen’s headquarters and factory are in Wolfsburg, Germany. (Yen Duong/Bloomberg)
key takeaways:
- Volkswagen plans to cut its model lineup by up to 50% after a July 9 supervisory board meeting.
- VW said low China profits, weak European demand, US tariffs and Chinese competition made existing cost cuts inadequate.
- Labor leader Daniela Cavallo demanded CEO Oliver Bloom to address workers by July 10 or face extraordinary worker meetings after the summer break.
Volkswagen AG plans to cut up to 50% of its vast model lineup, a savings boost that was announced after a closely watched supervisory board meeting failed to agree on deep workforce cuts.
The proposals follow a showdown at a July 9 board meeting, where CEO Oliver Bloom planned to double job cuts to 100,000 and push for the closure of four plants in Germany. VW offers around 150 model lines across its brands such as Porsche, Audi, Skoda and commercial vehicles.
Connected: VW labor leaders vow to fight deep cuts made by CEO
VW said the pullback is also intended to include more limited product options, reducing overall “offering complexity” and allowing development resources to be put into the highest-return segments. The plan did not outline clear targets for when the reductions could be achieved or which brands were in focus.
Europe’s biggest carmaker is facing its most significant restructuring in decades after profits in its biggest market, China, slumped and demand in Europe remains below pre-pandemic levels. According to Bloom, VW’s business model of developing and manufacturing cars for export from Germany is no longer viable.
Although the company has already agreed to deep cutbacks with employees in 2024, these are not enough as more challenging factors emerge. The US tariffs are hitting the group’s former cash cows Audi and Porsche particularly hard. In Europe, Chinese carmakers like Chery Automobile Co. are rapidly gaining market share with cheaper cars.
Connected: VW faces crucial test as CEO pushes for deep cost cuts
Details of possible measures and further job losses at sites in Germany were leaked ahead of the meeting, upsetting VW’s powerful labor representatives.
Chief Financial Officer Arno Antlitz said in a statement late July 9 that VW’s ongoing efforts to cut jobs and capacity were not sufficient “in the current economic and political environment.”
The decision follows weeks of tension with labor leaders and politicians over proposals to eliminate more jobs, close sites and build up the VW brand, according to people familiar with the discussions.
Early signals from the labor party, which holds half the seats on the supervisory board, did not indicate any easing of the impasse.
“Enough is enough; this is the last straw,” top labor representative Daniela Cavallo said in a statement, giving Bloom an ultimatum to address workers by July 10 or face extraordinary worker meetings at Volkswagen after the summer recess.
Volkswagen’s 2024 agreement with workers already calls for job cuts of more than 35,000 by 2030 at the VW brand in Germany, but management has argued that worsening conditions in China, Europe and the US mean the savings are no longer enough.
Any restructuring at Volkswagen is difficult due to the company’s complex governance, where worker representatives hold half the seats on the supervisory board and the state of Lower Saxony has significant influence.
