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VW targets model cuts of up to 50% after board showdown
Supervisory board meeting stops short of deeper workforce cuts and German plant closures
Volkswagen headquarters and factory in Wolfsburg, Germany. (Yen Duong/Bloomberg)
Key Takeaways:
- Volkswagen plans to cut its model lineup by as much as 50% after a July 9 supervisory board meeting.
- VW said lower China profit, weak European demand, U.S. tariffs and Chinese competition made existing cost cuts insufficient.
- Labor leader Daniela Cavallo demanded CEO Oliver Blume address workers by July 10 or face extraordinary worker meetings after summer break.
Volkswagen AG plans to cut its sprawling model lineup by as much as 50%, a savings push that was announced after a closely watched supervisory board meeting that stopped short of agreeing on deeper workforce reductions.
The proposals follow a showdown at the July 9 board meeting, where CEO Oliver Blume had planned to push for doubling job cuts to 100,000 and closing four plants in Germany. VW offers roughly 150 model lines across its brands like Porsche, Audi, Skoda and commercial vehicles.
RELATED: VW labor leaders pledge to fight deeper cuts pushed by CEO
The pullback is meant to include more limited product options as well, reducing overall “offering complexity” and allowing development resources to be put toward the highest-return segments, VW said. The plan didn’t outline firm targets by when the reduction might be achieved or which brands were in focus.
Europe’s biggest carmaker is facing its most significant restructuring in decades after profit in its biggest market, China, slumped and demand in Europe has stayed below pre-pandemic levels. VW’s business model of developing and making cars for export from Germany isn’t viable anymore, according to Blume.
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While the company has already agreed to deep cuts in 2024 with workers, these aren’t enough after more challenging factors emerged. U.S. tariffs are weighing on Audi and Porsche, the group’s former cash cows, in particular. In Europe, Chinese carmakers like Chery Automobile Co. are increasingly gaining market share with affordable cars.
RELATED: VW faces defining test as CEO pushes for deep cost cuts
Details of the potential measures on sites in Germany and further job losses had leaked through ahead of the meeting, irking VW’s powerful labor representatives.
VW’s ongoing efforts to cut jobs and capacity weren’t enough “in the current economic and political environment,” Chief Financial Officer Arno Antlitz said late July 9 in a statement.
The decision follows weeks of tension with labor leaders and politicians over proposals to eliminate more jobs, shutter sites and carve out the VW brand, according to people familiar with the discussions.
Early indications from the labor side, which holds half the supervisory board seats, didn’t indicate any easing in the impasse.
“Enough is enough; this is the last straw,” Daniela Cavallo, the top labor representative, said in statement, delivering an ultimatum for Blume to address workers by July 10 or face extraordinary worker meetings across Volkswagen after the summer break.
Volkswagen’s 2024 pact with workers already calls for more than 35,000 reductions at the VW brand in Germany by 2030, but management has argued that worsening conditions in China, Europe and the U.S. mean those savings are no longer enough.
Any restructuring at Volkswagen is difficult because of the company’s complex governance, where labor representatives hold half the seats on the supervisory board and the state of Lower Saxony has significant influence.
