Automotive News Europe — 2026-07-01
Automotive Industry
Volkswagen Group CEO Oliver Blume is expected to ask the automaker’s supervisory board in July to approve the biggest restructuring in modern German corporate history. He wants to eliminate as many as 100,000 jobs worldwide, which is 15 percent of the current work force, and close four factories in Germany as collapsing China sales and the breakdown of the free-trade model that fueled Germany’s export boom force a fundamental rethink of Europe’s largest automaker.
“We don’t earn enough money with our products,” Blume told shareholders at the annual general meeting on June 18. “Developing a world car in Germany, producing it in Europe and selling it globally – our business model that was successful for decades – no longer works today.”
VW Group has declined to comment on the reported figures, saying only that the group’s future strategy will be discussed by the appropriate corporate bodies.
VW Group’s struggles mirror a broader crisis engulfing the German industry, as its export-oriented business model is undermined by shifting global trade politics. No company embodies this shift and the crisis it poses for Europe’s largest economy like Volkswagen.
Facing sharply falling sales and profits, Blume is drawing up a plan to accelerate restructuring a company with more than 111 production facilities and more than 657,000 employees worldwide.
Signs of deep trouble have been visible for a long time as VW Group sales plunged in China and the U.S. and it faced new competition from Chinese manufacturers in traditional export markets such as Southeast Asia, the Middle East and Latin America.
Blume has been pushing for deeper restructuring at VW Group, announcing earlier this year plans to cut 50,000 jobs. According to a June 26 report in Germany’s Manager Magazin, Blume is now pushing to accelerate the plan.
In a statement, VW Group declined to comment on the media reports, saying “the issues will be discussed and approved by the relevant bodies.”
VW Group’s woes reflect a broader unraveling of the German automotive industry as its export-oriented business model crumbles in the face of a more restrictive and protectionist global trade environment.
German exports of passenger cars peaked at 4.4 million in 2016, just after VW Group’s diesel-emissions cheating scandal was exposed, according to Germany’s VDA automotive industry lobby. In the wake of the COVID-19 pandemic, vehicle exports plunged and have not recovered to past levels. Germany exported about 3.2 million vehicles last year.
For years, VW Group and other automakers have been shifting production of some models out of Germany to produce closer to customers in China. Taking advantage of the North American free-trade agreement between the U.S., Mexico and Canada, VW Group built factories in Mexico for export to the U.S.
That business model has been disrupted by U.S. tariffs and the rise of Chinese automakers, especially a host of electric vehicle manufacturers that are selling high-tech EVs at prices well below their European rivals. As a result, German automakers have rapidly lost market share in China, hitting sales and profits, and reducing demand for vehicles and components built in Germany and exported to China.
Last year, German exports of passenger cars to China fell 45 percent, according to VDA, as Chinese consumers increasingly shun Western brands. German auto exports to key southeast Asian markets including Thailand, Taiwan, and Malaysia also fell sharply as Chinese brands became popular in those markets.
VW Group is also uniquely exposed to U.S. tariffs on automotive imports. The automaker has said that the U.S. tariffs hitting its vehicles imported from Mexico and Europe, which include Audi and Porsche models, cost the company as much as €5 billion a year.
Media reports suggest VW Group management wants to shut four factories in Germany and that the Porsche and Piech families, the company’s biggest shareholders, are considering spinning off parts of the company to weaken the influence of labor representatives, who under German labor law have a big voice in company decisions.
The company is governed by a unique system in which labor representatives and the state of Lower Saxony, VW Group’s second-largest voting shareholder, hold enough influence on the supervisory board to block major restructuring measures.
The Porsche-Piech family, through Porsche SE, has increasingly supported deeper structural reforms as profitability has deteriorated, while labor representatives and Lower Saxony argue that the company should restore competitiveness through better products, new technologies and stronger market performance rather than factory closures.
Under the current legal framework, dubbed the VW Law in Germany, it would be close to impossible for the company to push through changes of this order against the will of labor representatives.
“If such plans were to move forward, we would do everything in our power to prevent them,” Daniela Cavallo, the top labor representative at VW Group, said in a statement. “Instead of engaging in blind, knee-jerk action, the executive board should finally do its job.”
A large number of VW Group jobs and factories are located in Lower Saxony, which holds 20 percent of the voting rights, giving the state officials on the company’s supervisory board the power to veto any decision. Any management move that involves major job cuts or affects entire factories often sees Lower Saxony side with labor, requiring management to seek compromise with labor.
Lower Saxony Prime Minister Olaf Lies, who sits on Volkswagen’s supervisory board, has vowed to resist factory closures and deeper job cuts, arguing that management should restore competitiveness by developing better products and winning back market share rather than shrinking the company.
“Our task must be to ensure that we don’t seek solutions through simplistic measures like ‘We’ll lay off employees or close locations’,” Lies told German TV broadcaster ZDF over the weekend. “We have to be competitive; we have to be technological leaders.”
One challenge is that VW Group, and Germany’s automotive production base overall, is now too big for the shrinking demand for its products. Germany’s automotive industry has the capacity to produce about 6 million vehicles a year in its domestic factories, but last year those plants only produced 4.1 million vehicles.
Through expansion in China and other global markets, VW Group sales rose to nearly 11 million vehicles in 2019. Sales fell in the wake of the pandemic and have not recovered. Last year, VW Group delivered 9 million vehicles to customers.
The turmoil at company is also becoming a political issue reaching well beyond the automotive sector.
The industry’s struggles have become a symbol of broader concerns over Germany’s economic competitiveness, providing fresh ammunition for the far-right Alternative for Germany ahead of state elections later this year.
“The shocking developments in the labor market are further evidence of the failure of the economic policies pursued by the coalition led by Friedrich Merz,” AfD co-leader Alice Weidel said. “German industrial jobs are being lost or relocated abroad on an unprecedented scale.”
She called the reported Volkswagen layoffs evidence of “an ongoing process of deindustrialization” and urged lower taxes, lower energy costs and the abolition of carbon pricing.
The federal government has sought to strike a careful balance between supporting industrial competitiveness and avoiding direct involvement in corporate decisions. But the debate has also raised a question that would have seemed unlikely only a few years ago: whether Chinese manufacturers could become investors in Germany’s shrinking automotive production base.
Asked whether Berlin would support Chinese automakers acquiring underutilized German factories, government spokesman Stefan Kornelius declined to directly endorse such a scenario, saying the focus is to protect jobs.
“Our highest priority is preserving the production sites of German manufacturers and safeguarding jobs,” he said. “But, in principle, any investment in Germany that creates jobs is valuable.”