Volkswagen CEO Oliver Blume has warned employees that the carmaker's position is 'more than critical', according to reports from AFP. The warning was posted on the auto giant's intranet ahead of executive meetings with staff where he is set to explain the company's savings plans. Blume stated that VW and the car industry in Germany is facing 'the biggest upheaval in their history' due to global headwinds and Chinese competition, as reported by AFP. In an interview published on VW's intranet, Blume said the group remains capable of acting but faces an acute need for action. The operating margin of 3.8 percent, while solid given the difficult environment, is 'far from sufficient to generate lasting adequate funds for new technologies, new products, and our locations'. However, the company's own supervisory board deputy chair Christiane Benner described VW's profitability targets as belonging in 'cloud-cuckoo-land', essentially calling them unrealistic under current conditions.
The carmaker is weighing up huge job cuts as part of its restructuring efforts, according to AFP. In the coming days, Blume will meet with employees at Volkswagen's headquarters in Wolfsburg and sites in Zwickau and Emden to give updates on the company's plans. Blume said that no decision had been taken on plant closures but reiterated the company's position that for plants in Emden, Hannover, Zwickau and Neckarsulm we cannot currently see any way of them remaining profitable in the 2030s. The company has already ordered 50,000 job cuts and Blume said that agreements have already been reached with 37,000 employees. However, Blume has downplayed the frequently cited figure of 50,000 jobs at risk, stating it is 'not a fixed target' but rather a figure derived from cost targets compared with competitors. Volkswagen plans to reduce its workforce mainly through voluntary departures, early retirement and restrictions on new hiring, with the company stressing that the potential figure of 100,000 job cuts has not been finalised. Christiane Benner, who also chairs Germany's IG Metall labor union, said labor will not accept factory closures and demanded clearer cost-cutting plans before approving any measures.
Blume and VW brand chief Thomas Schäfer are due to present their restructuring plan, which could wipe out as many as 100,000 jobs, at the company's main Wolfsburg factory on Tuesday, marking the first of a series of townhall gatherings across Germany in the coming days. Tensions have been running high even before the initial meeting, with more than 10,000 workers gathered in Wolfsburg, where Blume faced boos and criticism over potential job losses and the company's restructuring plans. Daniela Cavallo, chief of Volkswagen's works council, said trust in CEO Oliver Blume and the executive board had suffered severe damage, though she added that the relationship was not beyond repair. The 58-year-old manager has made the overhaul the defining test of his tenure, wanting to reduce costs and remake Volkswagen for an industry upended by electric mobility, software and fast-moving rivals from China. However, the automaker's special governance means he cannot simply order the cuts, but needs to bring powerful labor leaders and the state of Lower Saxony, which can veto some major decisions, along with him.
Blume highlighted that the company faces over-production of 500,000 vehicles per year in Europe, as reported by AFP. He emphasized that closing factories would always be 'the last and most expensive solution'. At sites where car production may stop, Volkswagen is exploring other 'industrial solutions', pointing to advanced talks with companies from the defence industry over using its factory in Osnbueck. The company's current profit levels are not sufficient to ensure long-term funding for new technologies, products and locations. Under Blume's internally discussed plans, Volkswagen would no longer produce cars in Germany outside its main Wolfsburg plant within a few years. The plants in Zwickau and Emden would close in 2031, with Hanover following in 2032. Volkswagen is holding a series of meetings with staff in Germany as the company prepares for extensive cuts. Blume said Volkswagen's overhead costs are more than 30% higher than those of comparable companies and is looking to reduce annual production capacity in Europe by another 500,000 units.
Alongside competition in and from China, Blume identified tariffs imposed by the United States, the war in the Middle East and regulatory burdens as key challenges for the company, according to AFP. When asked whether he expected the situation to improve, Blume said 'on the contrary, we have to assume that risks will get worse, worldwide'. Weak demand across Europe has added to the pressure, with Volkswagen reportedly carrying excess production capacity of around 500,000 vehicles annually. US tariffs, global economic uncertainty and the need for heavy investment in new technologies are further complicating Volkswagen's efforts to improve profitability. Porsche SE, the holding company of the billionaire Porsche-Piëch family that controls Volkswagen, has urged management to move faster, warning that VW is at a 'historic crossroads'. The clan has its own reason for urgency: waning profits at Volkswagen and sports-car maker Porsche AG are minimizing the dividends it's long relied on. Volkswagen's earnings have been battered by declining sales in China, high expenses in Germany and underused factories, leaving the company with a roughly 30% cost disadvantage to some rivals and at least €10 billion of overhead to strip out.
