Last week, the management of the Volkswagen Group presented a new comprehensive work plan for the future, which includes a package of 12 initiatives and a vision of business reconstruction until 2030. The goal of this strategic plan is to make the German automobile giant more resilient, more efficient and more competitive in the conditions of heightened geopolitical tensions, rising costs caused by customs duties and increasingly strict regulatory requirements in the global market. The implementation of the initial measures has already begun, but it is facing serious internal resistance.
The plan envisages a gradual reduction of the model range by up to 50%, with concentration on the most attractive market segments, while the complexity of the offer and equipment options would be reduced by up to 75%. On the technological front, the company strives to harmonize platforms, electronic architectures and software especially for Western and Eastern markets. At the same time, the technical capacities of the production network are being adapted to the global environment, with a new target of approximately 9 million vehicles per year for all brands, which is a reduction compared to the previously planned 12 million.
Announcement of radical cuts
Despite the management’s vision, the Supervisory Board of the Volkswagen Group, at a meeting held on July 9 in Wolfsburg, officially rejected the extreme restructuring proposal submitted by the CEO Oliver Blume. The vote was 12 to 19 against Blume’s plan, which is not surprising given that 10 of the 19 board seats are held by workers’ representatives, and the federal state of Lower Saxony, as the second largest shareholder, also has a strong influence.
VW
The rejected proposal of the executive director envisaged the elimination of around 100,000 jobs, the closing of certain factories in Germany and the potential separation of the Volkswagen brand from the rest of the group. Chief Financial Officer Arno face he pointed out that the current cost reductions are not enough in the current economic environment and that it is necessary to structurally improve the cost structure and reduce overhead costs, but the board has drawn the line on mass layoffs.
Resistance of the works council
This development caused a sharp reaction within the company itself, and the workers and union representatives turned against the CEO. Daniela Cavallopresident of the works council and member of the Supervisory Board, issued an ultimatum to Blume, demanding that he personally explain to the workforce the extent and intentions of the proposed plan. The workers’ council then distributed a special edition of its newspaper stating that Blume would have to answer workers’ questions at meetings during the summer break.
The company is currently facing serious market pressures, primarily due to declining sales and profits in China, where local brands led by BYD are taking over, as well as US tariffs that are weighing on the earnings of Audi and Porsche. The market value of Volkswagen fell to a ten-year low of 41.1 billion euros. Since the radical cuts have been stopped, Volkswagen will have to implement the cost reduction strategy gradually and selectively over the coming months, while the restoration of the damaged trust in the leadership could take much longer.