Volkswagen approves plan to cut 100,000 jobs amid restructuring

The car company Volkswagen has approved controversial plans to shed 100,000 jobs in a battle for survival as it faces fierce competition from Chinese rivals.

After the latest round of talks this week, the company announced a further 50,000 job cuts and agreed a staggered end to current production at four German plants: Emden, Zwickau, Hanover and the Audi site in Neckarsulm between 2031 to 2034. There are no specific plans beyond that.

The agreement came as a surprise after a meeting of shareholders, unions, and state representatives on the supervisory board in what was seen as a considerable test for the German carmaker’s chief executive, Oliver Blume.

He had gone as far as to arrange an emergency meeting if the package was rejected in preparation for a potential showdown with unions.

“This is a strong signal for the future,” said Blume, who now has a mandate for what the company previously called the “most strategically profound transformation programme” in the history of the VW group.

He was booed last month by staff during a tour of the company’s headquarters in Wolfsburg, northern Germany, as part of a dialogue about the need to address the company’s financial challenges.

IG Metall, the company’s biggest staff union and representative on the supervisory board, said concessions had been made on both sides to avert “a dangerous escalation of the conflict”.

Chief among these was a stay of execution for four plants threatened with closure in exchange for an agreement on staff reductions. The deal includes a sweeping cost-cutting plan to cut a further 50,000 positions by 2030, bringing the total job losses in the pipeline to 100,000.

“Concrete solutions must now be developed for all locations … we expect the board to now do its homework based on the compromise reached and deliver results promptly,” said Christiane Benner, the first chair of IG Metall, and Daniela Cavallo, the chair of the General and Group Works Councils of VW.

Blume said the company would be investing “a three-figure billion sum” in the next few years “to make our iconic brands even more attractive, stronger and more competitive”.

The supervisory board acknowledged that there was over capacity in Europe to produce 500,000 vehicles for which there was no market.

Plans to turn a plant in Osnabrück into a defence factory were abandoned this year after objections from Qatari investors.

The number of car models VW group produces, which includes the Bentley and Audi brands, will be slashed by half. “It is essential to systematically align workforce levels with economic realities,” VW said.

The total of 100,000 cuts will be the largest restructuring ever carried out in the global automotive industry and amounts to about 15% of the carmaker’s employees.

Volkswagen employs more than 650,000 people across all its brands, which also includes Skoda, Seat, Porsche, Cupra and Lamborghini.

Analysts at Deutsche Bank said the approval of the restructuring plan was a “fundamental breakthrough” and proved wrong investors who believed the carmaker to be “unfixable”.

“The unanimous approval is, in our view, a fundamental breakthrough and a much-better-than feared outcome,” the analysts said in a note to investors on Friday.

“To be clear [the] agreement does not solve Volkswagen’s challenges overnight. Execution remains key. The market debate was never about whether Volkswagen had challenges. It was about whether those challenges could realistically be addressed within Volkswagen’s complex governance structure. [The] agreement does not end that debate, but it provides the strongest evidence yet that the answer may be yes.”

VW has faced increasing pressure from Chinese competition in Europe, decreasing sales in China and hefty US tariffs. Even before that, it was struggling for years with falling profits and overproduction in Europe.

Analysts at Citi called the deal a “brave and rational plan”, adding that it was a “realistic decision for all concerned”.

“Given VW’s German plant competitiveness and lack of global revenue opportunities, VW simply had no other choice,” the analysts said. “Given VW’s supervisory board structure, this illustrates also the responsibility the workers council has taken for ensuring the long-term survivability of the VW core business in Europe.”

Shares in VW rose 8% in early trading on Friday.

The tough market in China has also hit other carmakers. BMW, for example, cut its profit guidance for this year because of the disruption caused by the Iran war and the company’s struggles in the Chinese market.