VW job cuts could reach 140,000 as capacity falls further

Volkswagen’s original agreement to cut 50,000 jobs was unprecedented at the time, but now comes across as a moderate option. By Stewart Burnett

Volkswagen’s labor representatives reportedly warned on 24 August that the automaker’s restructuring could eventually affect as many as 140,000 jobs—well above the roughly 100,000 positions management has indicated thus far—as the group separately works on plans to cut a further 500,000 vehicles from its annual European production capacity, according to Bloomberg. That additional reduction would bring Volkswagen’s effective global capacity target down to 8.5 million units, continuing a decline from the 12 million units cut to nine million in April.

Union officials’ 140,000 figure can be broken down into three rough layers: around 50,000 job reductions already agreed in Germany, another 50,000 positions across VW’s production network, and a further 40,000 jobs tied directly to the potential closure of four German plants: Emden, Hanover, Zwickau and Audi’s Neckarsulm site. The long-term futures for all four remain uncertain.

The factories in question have repeatedly been the subject of closure rumours in recent months, but Chief Executive Oliver Blume has called any closure within the decade unrealistic. However, both he and management have repeatedly noted that it is difficult to determine a profitable internal use for any of them, and none are expected to find competitive capacity utilisation before 2030 regardless. External parties—most notably Xpeng—could potentially make a brownfield acquisition, but this remains far from certain, and no updates from either side have been reported in several months.

Blume and Volkswagen brand chief Thomas Schäfer presented the cutback plans directly to workers at the company’s main Wolfsburg factory on 25 August, marking the first of a series of townhall meetings planned across Germany over the coming days. Chief Financial Officer Arno Antlitz and other senior executives are fanning out to Volkswagen’s other German plants to make the same case in parallel.

Tensions were already running high before the meetings began. IG Metall Chief Christiane Benner lambasted Blume’s push to cut costs and lift operating margins to 9% as “cloud cuckoo land”. Volkswagen has defended it as necessary to invest in the technologies and manufacturing processes that will secure its place in the industry’s future. Unions have also criticised the “disastrous” communication between management and workers, describing a widespread atmosphere of fear and uncertainty on factory floors. 

A local union leader warned on 24 August that the workforce is prepared to consider unprecedented strike action if Blume does not walk back his plans. Works council leader Daniela Cavallo also said in Hanover that management needs to deliver clear future job prospects for workers at every German plant, not simply demand further cuts on top of reductions to which it had previously agreed. Now the automaker appears to be framing those original figures as indicative of the scale of transformation required, rather than a binding commitment.

The capacity reduction driving the 8.5 million figure has its own separate history. Volkswagen’s original pre-pandemic target of 12 million units fell to nine million in April, and the additional 500,000-unit cut now under discussion applies specifically to European production. Beyond a tacit acknowledgement that at least one of the four plants under review for closure may proceed, the latest revision is an acknowledgement by management that the company is currently selling half a million fewer cars annually in Europe than it did before the pandemic. The shortfall is roughly equivalent to the output of two full assembly plants operating at maximum capacity.  

Certainly the concerns now stretch far beyond the factory floor, albeit in the opposite direction. Porsche SE, the holding company through which the Porsche-Piëch family holds a stake in Volkswagen, has urged management to move faster, warning the company is at a “historic crossroads”. The family has its own financial stake in speed, since falling profits at both Volkswagen and Porsche AG are shrinking the dividends upon which it has long relied. Volkswagen’s overhead costs remain more than 30% above comparable automakers, and operating margin came in at just 4.2% in the second quarter—substantially short of the 9% target IG Metall has already rejected.

Unfortunately for management, Volkswagen’s governance structure means Blume cannot simply barrel ahead with the cuts. Labour representatives and the state of Lower Saxony, which holds a shareholding and a veto over some major board decisions, together control enough of the supervisory board to delay or dilute whatever restructuring management ultimately proposes. 

IG Metall’s rejection of the 9% margin target itself, not just the headcount attached to reaching it, suggests this dispute runs deeper than a negotiation over numbers. Even a revised, lower job-cut figure would not resolve a disagreement over whether Blume’s underlying financial goal justifies the scale of cuts being proposed at all.