Automotive News Europe — 2026-07-10
Automotive Industry
Volkswagen Group plans to drastically cut its model lineup and further pare back capacity, as Europe’s largest automaker considers a far-reaching overhaul that sources say could cost around 100,000 jobs.
The company said on July 9 after a closely watched supervisory board meeting that its lineup would be gradually cut by up to half, as it concentrates on the most attractive market segments. Production capacity will be reduced to nine million vehicles per year, down from 10 million currently.
VW offers roughly 150 model lines across its brands, which include Audi, Bentley, Cupra, Lamborghini, Porsche, Seat, Skoda and commercial vehicles. The plan didn’t outline firm targets by when the reduction might be achieved or which brands were in focus.
Volkswagen is under unprecedented pressure to restructure the business model that underpinned its success for decades, as it grapples with high costs and excess capacity at home. Those factors, along with rising Chinese competition, regulation, and U.S. import tariffs, sliced its profit margins in half between 2021 and 2025.
“The global situation has continued to deteriorate over the past 12 months,” said Volkswagen CEO Oliver Blume, who presented his Future Plan to the supervisory board on July 9. “That is why we are acting now.”
Sources have said Blume is considering closing four German plants — Hanover, Emden, Zwickau and Audi’s Neckarsulm site — and cutting up to 100,000 jobs, roughly double the number currently planned, in what would be Volkswagen’s biggest restructuring yet.
The plant closures would happen in phases until the mid-2030s, according to reports in the German news media.
Volkswagen did not provide specifics on potential job cuts and factory closures, which drew huge worker protests across company sites on July 9.
The prospect of plant closures and deep job cuts at one of Germany’s most storied companies, founded 89 years ago, exemplifies the challenges Europe’s largest economy faces as it struggles with weak growth and high labor and energy costs.
So-called offering complexity, including the number of equipment options on specific models, will be cut by up to 75 percent.
Reaction from analysts was mixed, with some saying VW had not gone far enough to counter the threat from China and changing market conditions.
“VW’s Future Plan reinforces our view that deeper restructuring is needed, with the lack of detail suggesting key decisions remain subject to negotiations with unions and Lower Saxony,” Michael Dean and Giacomo Reghelin of Bloomberg Intelligence said.
Bernstein said in a note that the Future Plan was “long on ideals but very short on specifics of how the plan would be executed. We do not expect the stock to react well to the details we have so far.”
In a press briefing ahead of the board meeting, Patrick Hummel of UBS said he was worried that any job cuts or factory closures would not be enacted quickly enough to counter an expected price war in Europe driven by Chinese companies desperate to find profits outside of China.
“The chance of VW getting ahead of the wave is very slim,” he said. Hummel said VW’s best chance to boost profits is to “do the utmost to get as lean as possible in Germany” and bring down variable costs across the board.
Ferdinand Dudenhöffer, a German automotive analysts, was critical of the plan for not specifically addressing production or employment. “One could also say that uncertainty remains – which is not good for customers, employees and investors,” he said.
No decision on job cuts at board meeting
At the board meeting at Volkswagen’s headquarters in Wolfsburg, Blume faced the committee’s powerful labor representatives, who oppose deeper cuts across the group.
He is also under pressure from the Porsche and Piech owner families, whose core investments have lost tens of billions of euros in market value in recent years.
Volkswagen shares have lost more than half their value in the last three years.
In Wolfsburg, workers blew whistles, waved red union flags and marched behind a banner reading “gemeinsam stark” — “strong together” — as a klaxon sounded in the background.
The IG Metall union said around 400 people were demonstrating in Wolfsburg, with union representative Thorsten Groeger warning the company risked a “major conflict” with workers.
Daniela Cavallo, the head of the company’s works council, which represents employees, said staff members were not to blame for the sector’s crisis, and that “great fear and deep uncertainty” were spreading across company factories and offices.
Volkswagen’s works council called on Blume to address speculation around job cuts and plant closures by a Friday deadline, warning of further extraordinary staff meetings in the months ahead if he did not.
Volkswagen faced mass strikes in December 2024, but there is currently an agreement for workers not to take industrial action while existing work contracts are in force.
The company’s supervisory board includes representatives of the owner families, unions and the Lower Saxony state government, a power-sharing structure that often complicates decision-making.
Factories expected to cut output
Under Blume’s last restructuring deal, unions secured a commitment from management to avoid German plant closures, prompting Volkswagen to seek alternative uses for underutilized sites.
Those efforts include a long-running search for a defense-sector partner for the Osnabrück factory and the possibility of producing models designed for the Chinese market in Germany.
Mobility Global data seen by Reuters estimates the group’s German car plants will operate at 81 percent of standard capacity in 2026. That figure is expected to fall to 73 percent by the end of the decade, even after the anticipated removal of Osnabrueck from the network.
Among the four sites threatened with closure, Zwickau is forecast to have the highest utilization rate in 2026 at 88 percent, which is expected to fall to 42 percent by 2030, the data showed.
Germany’s Conservative chancellor, Friedrich Merz, currently trailing in polls to the far-right Alternative for Germany, has promised a series of reforms to make Germany more competitive.
The AfD, which could take power in a German state for the first time in elections in September, has seized on Volkswagen’s troubles as a line of attack against the government.
Bloomberg and Reuters contributed to this report.