Volkswagen Group is in turmoil, due largely to elevated gross sales of Chinese language-made vehicles in European markets. The corporate has uttered darkish warnings about closing factories in Europe for a number of years. CFO Arno Antlitz stated at a convention hosted by Goldman Sachs in London on December 5, 2024, that Volkswagen Group wanted to take “decisive motion” at its German factories to return them to full working capability.
“Our goal is for our factories to be buzzing with exercise,” he stated. “The choice is very detrimental. Every underutilized manufacturing facility steadily bleeds out, turning into inefficient and constantly shedding competitiveness.” Over the previous 20 years, some Volkswagen factories in Europe have been working at lower than 60 p.c of capability, with an estimated unused capability of as a lot as 800,000 models.
Assembly The Problem From China
By now it is not uncommon data that it’s far cheaper to fabricate vehicles in Asia — and notably China — than it’s in Europe. Just about each manufacturing facility in China is comparatively new whereas many in Europe have been cranking out vehicles for generations. Over time, European labor unions have been fairly profitable at elevating the usual of residing for its members by negotiating will increase in wages and advantages.
Between having extra inefficient factories and paying manufacturing employees extra, corporations like Volkswagen are discovering it more durable to make a buck. In 2024, its per automobile revenue was $5,919 on gross earnings of $53.5 billion — up strongly from 2016 when it had a gross revenue of $37 billion at a median of $3,593 per automobile. Whereas the corporate seems to be doing greater than okay on paper, a lot of the rise in revenue has come from manufacturing exterior of Germany.
In 2024, the corporate stated it wished to shut a number of factories in German. That suggestion was met with stern resistance from IG Metall, the union that represents most of Volkswagen’s manufacturing employees. Finally, the 2 sides agreed to shutter three German factories and cut back the workforce in Germany by 30,000 — largely by attrition.
Group Goal Image
However now, Supervisor Magazin — some of the authoritative trade journals in Germany — claims it has info from firm insiders that CEO Oliver Blume has floated an concept to shut 4 factories and eradicate 100,000 employees each in Germany and all over the world by 2030. It says the plan can be made public at an organization board assembly on July 9. The factories affected are stated to be these in Hanover, Zwickau, and Emden, in addition to the Audi manufacturing facility in Neckarsulm.
If carried out, the plan — identified internally because the Group Goal Image — would successfully remodel Volkswagen AG into a brand new firm, in response to Supervisor Magazin. The report claims the restructuring would eradicate round one-seventh of the group’s world workforce, open the corporate additional to capital markets, and considerably cut back worker affect. IG Metall is sure to have one thing to say about that final level.
Supervisor Magazin reviews the board is ready to section out all 4 websites over the following few years whereas persevering with the manufacture of present fashions. Based on insiders, manufacturing would then finish, with successor fashions both cancelled or transferred to lower-cost manufacturing areas.
These 4 vegetation make use of about 40,000 individuals and have a mixed annual manufacturing capability of roughly 750,000 autos. Manufacturing at these factories will not be anticipated to finish till after 2030, except CEO Oliver Blume decides to discontinue the affected fashions earlier, one thing that’s not within the present plan.
EV Factories Affected
The Zwickau and Emden factories are devoted to producing battery electrical autos. Zwickau builds the ID.3, ID.4, and ID.5, in addition to the Cupra Born and the Audi This autumn e-tron. Emden manufactures the ID.4, ID.7, and ID.7 Tourer. Volkswagen has already diminished manufacturing capability at each vegetation from two meeting strains to at least one, every working with two shifts, in response to overcapacity.
The Hanover plant serves because the headquarters of Volkswagen Industrial Autos and manufactures the all-electric ID. Buzz and ID. Buzz Cargo, alongside the T-series fashions. The manufacturing facility additionally operates a battery meeting line. The Audi plant in Neckarsulm primarily builds combustion engine and hybrid fashions, whereas the close by Böllinger Höfe facility produces the all-electric Audi e-tron GT. Audi beforehand closed its Brussels plant in February 2025.
Based on Supervisor Magazin, the proposed restructuring consists of not simply job cuts and plant closures, it additionally foresees a basic restructuring of the Volkswagen Group organizational plan. That will embrace not solely spinning off the core Volkswagen passenger automobile model however the group’s Parts division as nicely. Based on the report, these strikes would make the companies simpler to listing on the capital market. Particulars of the plan could also be forthcoming on July 9.
Labor Is Displeased
Labor, naturally, will not be completely happy about these new developments. Two years in the past, it agreed to job cuts of 30,000, a determine that was later elevated to 50,000. Now it’s double that or extra. In a joint assertion, IG Metall chair Christiane Benner, Volkswagen Group Works Council chair Daniela Cavallo, and IG Metall district supervisor Thorsten Gröger stated: “The newest media reviews are understandably inflicting uncertainty amongst our workforce and within the areas the place our websites are positioned. However assaults on the Volkswagen Act, co-determination, and our websites are irresponsible threats. Ought to such plans be pursued, we’ll oppose them with all of the means at our disposal. As a substitute of partaking in blind activism, the Administration Board ought to lastly do its job and deal with its core tasks — aggressive merchandise, applied sciences, Group buildings, and synergies, and subsequently safe employment.”
Whereas making ready to fireside all these individuals, Volkswagen has shoveled greater than $6 billion to Rivian to assist it lastly get its software program home so as. Rivian is a pioneer of zonal structure. Its founder and CEO RJ Scaringe instructed The Guardian this week that standard vehicles have been caught with a design that scatters pc chips all through the automobile — from the engine to the seats and wing mirrors — relatively than a centralized structure that may be simply modified. Counting on a single pc — that’s the zonal method — reduces manufacturing prices by “1000’s of {dollars}” per automobile, he stated. (That is what Tesla has been doing because it launched the Mannequin S in 2012.)
Gamechanger
Earlier this yr, Automobilwoche reported that Volkswagen has begun implementing new manufacturing strategies — code named Gamechanger — at its principal manufacturing facility in Wolfsburg. Whereas particulars are sketchy, it seems that Gamechanger includes excessive strain castings and an “unboxed” meeting course of. Historically, your complete construction of the automobile is accomplished after which issues like dashboards, seats, and controls are slipped in by door or windshield openings to finish the method. Within the “unboxed” methodology, the entrance and rear castings are first fitted with all the inside bits after which melded collectively, utilizing the battery field because the structural hyperlink between the 2. We count on to listen to extra about this within the close to future. Once more, this may increasingly remind you of what a sure American automobile firm began doing lately.
The one fixed in life is change, and what’s taking place at Volkswagen at the moment is proof. The company will possible survive the turmoil, however the individuals who lose their employment might not. If the Zwickau manufacturing facility closes, that may deal a critical financial blow to Leipzig and the encircling space, which for a very long time was a part of East Germany.
Economics are vital, after all, however looking for the individuals who make the completed merchandise is vital too. There can be a variety of social ache that goes together with Volkswagen’s restructuring because it tries to fulfill the problem of manufacturing in a modified world.
