Electric van assembly at the Volkswagen plant in Hanover, Germany. (Kriztian Bocci/Bloomberg)
key takeaways:
- Volkswagen CEO Oliver Blume outlined plans to cut an additional 50,000 jobs globally as part of broader cost cuts.
- The move reflects pressure from nearly 20% higher overheads at rivals and weak demand in China and Europe, as well as tariffs hurting luxury brands.
- The proposal faces worker opposition and uncertain board support as VW reviews plant closures, asset sales and production plans to improve competitiveness.
Volkswagen AG CEO Oliver Blume outlined plans to eliminate more than 50,000 jobs globally as he attempts a far-reaching overhaul to cut costs at Europe’s biggest carmaker.
The German maker’s overhead is about a fifth higher than competitors, Blume said in an interview published on VW’s intranet. Reaching parity implies a “theoretical cut” of about 50,000 positions, part of a cost-saving effort planned for 2024, he said.
“Group head counts have been growing for decades to levels that are no longer viable today,” Bloom said, according to the memo seen by Bloomberg News. “This is due to changes in the markets and negative impacts beyond our control, the impact of which amounts to a double-digit billion euro volume.”
VW has gone through a tumultuous few weeks, with pressure to make cuts renewed due to the worsening business outlook. Blume’s plan – which reportedly includes doubling the original 50,000 cuts and potentially closing four plants in Germany – faced opposition from workers and failed to win initial board support.
The places at risk are Emden, Hanover, Zwickau and Neckarsulm. In the memo, Bloom said there were “smarter options” than closing factories to address higher spending levels and declining demand. He said he was encouraged by an average 20% improvement in factory costs in Germany over the past year.
“It is also true that today, we cannot confirm competitive allocation for plants,” he said, referring to the company specifying models for production around its vast network of sites.
VW, which employs more than 657,000 people worldwide, is grappling with a number of challenges that have also beset competitors Stellantis NV, BMW AG and Mercedes-Benz Group AG. Most significant is the decline in sales in China, where buyers grapple with a prolonged real estate crisis. US tariffs are also hurting the profits of the usually lucrative Audi and Porsche luxury brands. .
With the sluggish European market, VW’s high costs and underutilized factories have come into focus. Bloom said last month that the company’s business model of developing and exporting cars from Germany is no longer viable.
Last month, VW sold a 51% stake in its ship engine unit Everlens, raising proceeds of about 7.4 billion euros ($8.5 billion). VW has a portfolio of more than 2,000 stakes and businesses, which is “an important area for transformation,” Bloom said.
The company also owns stakes in the Ducati motorcycle brand and American solid state battery maker QuantumScape Corp. It plans to examine which parts of its portfolio contribute to its core automotive business and returns.
