Volkswagen approves “historic restructuring”: another 50,000 layoffs, double the previous scale, and the model lineup will be halved within ten years

Volkswagen is advancing the largest structural transformation in its history.

According to the Financial Times, the Supervisory Board unexpectedly voted unanimously on Thursday to approve CEO Oliver Blume's comprehensive restructuring plan, which includes laying off an additional 50,000 employees and reducing the model lineup by up to 50% before 2035, in response to high costs, weak demand, and continued pressure from Chinese competitors.

The newly added 50,000 layoffs, combined with the 50,000 jobs eliminated since 2024, mean that the total number of layoffs across Volkswagen Group brands has reached 100,000, in line with the maximum proposal put forward by Oliver Blume earlier this year. The additional job cuts account for about 8% of Volkswagen's global workforce of approximately 652,000 employees at the end of last year, and include management positions.

According to the plan announced on Thursday, Volkswagen will cut about half of its currently available models over the next nine years to decrease product line complexity, and leverage economies of scale to lower unit vehicle costs. The Supervisory Board explicitly acknowledged in its decision that "Volkswagen’s European production capacity currently exceeds demand by more than 500,000 vehicles."

Volkswagen told investors that this restructuring would be the “largest transformation plan in the company’s history.” The Supervisory Board brought forward the meeting originally scheduled for Friday and, after marathon negotiations with the unions and Lower Saxony, officially approved it late Thursday night. The company also announced that it aims to raise the group’s operating margin from 3.8% in the first half of this year to 9% by 2030.

Performance Under Pressure, Transformation Is Urgent

Financial data reveal the urgency of the restructuring. In the first half of 2026, Volkswagen Group's vehicle sales fell 8.4% year-on-year, operating profit dropped 11.6%, and the operating margin was just 3.8%. Increased competition from Chinese local carmakers, the impact of US tariffs, and a weak European home market together constitute the core pressures currently facing Volkswagen.

The transition to electrification is also imposing a significant cost burden. Volkswagen needs to continue investing resources in developing electric vehicle platforms while maintaining its traditional internal combustion engine business. Operating both lines in parallel has significantly pushed up operating costs, making the strategic rationale for streamlining the product line and concentrating resources all the more evident.

At the factory level, Oliver Blume had previously stated that unless the Emden, Zwickau, Hanover, and Neckarsulm plants achieve cost reductions, no new models will be allocated to them. In a statement on Thursday, Volkswagen added that “at the same time, alternative uses for these plants are being evaluated,” hinting that factory closures remain a possibility.

Lower Saxony Governor Olaf Lies stated: “In the face of international competition, the challenges for Volkswagen and the German automotive industry are huge. This makes it all the more important that we now jointly embark on this necessary transformation.”

The market reacted positively to the Supervisory Board's unanimous approval. RBC Capital Markets analyst Tom Narayan described the agreement between the board and the unions as a "positive surprise," but also emphasized that execution of the plan is key. “We believe this decision is an important step for Volkswagen to close the cost-competitiveness gap with Chinese automakers who are actively expanding in Europe,” he said.

Union Bargaining: Spin-Off Proposal Temporarily Shelved

The negotiation process was quite tortuous. Just 24 hours before the Supervisory Board approved the resolution, prospects for negotiations between management, the union, and Lower Saxony were still very bleak. Lower Saxony is not only the location of Volkswagen’s headquarters and many factories; it is also a major minority shareholder in the company, with veto power over major decisions.

Another controversial point in the restructuring plan—splitting Volkswagen’s brand and components business from the Group into an independent entity—met strong opposition from the unions during the negotiations. IG Metall stated that the spin-off scheme “has been shelved,” arguing this move would weaken workers' co-determination rights. IG Metall Chair Christiane Benner and Volkswagen Works Council Chair Daniela Cavallo said in a joint statement: “No factory will be abandoned.”

However, according to a person close to Volkswagen, the spin-off plan remains under discussion, and the ultimate form of the restructuring is still subject to change.