WOLFSBURG, Germany — Volkswagen plans to drastically cut its model lineup and further pare back capacity, as Europe's largest automaker considers a far-reaching overhaul that sources say could cost around 100,000 jobs.
Volkswagen is under unprecedented pressure to restructure the business model that underpinned its success for decades, as it grapples with high costs and excess capacity at home.
Those factors, along with rising Chinese competition, regulation and US import tariffs, have sliced its profit margins in half between 2021 and 2025.
The company said on Thursday, following a board meeting, that its lineup would be gradually cut by up to half, as it concentrates on the most attractive market segments.
Production capacity will be reduced to 9 million vehicles per year, down from 10 million currently.
"The global situation has continued to deteriorate over the past twelve months," Volkswagen CEO Oliver Blume said. "That is why we are acting now."
Sources have said Blume is considering closing four German plants — Hanover, Emden, Zwickau and Audi's Neckarsulm site — and cutting up to 100,000 jobs, roughly double the number currently planned, in what would be Volkswagen's biggest restructuring yet.
The prospect of plant closures and deep job cuts at one of Germany's most storied companies, founded 89 years ago, exemplifies the challenges Europe's largest economy faces as it struggles with weak growth and high labor and energy costs.
So-called offering complexity, including the number of equipment options, will be cut by up to 75 percent.
No word on job-cut speculation
At the board meeting at Volkswagen's headquarters on Thursday, Blume faced the committee's powerful labor representatives, who oppose deeper cuts across the group, which includes the Audi and Porsche brands.
He is also under pressure from the Porsche and Piech owner families, whose core investments have lost tens of billions of euros in market value in recent years. Volkswagen shares have lost more than half their value in the last three years.
In Wolfsburg, workers blew whistles, waved red union flags, and marched behind a banner reading "gemeinsam stark" — "strong together" — as a klaxon sounded in the background.
The IG Metall union said around 400 people were demonstrating in Wolfsburg, with union representative Thorsten Groeger warning the company risked a "major conflict" with workers.
Daniela Cavallo, the head of the company's works council, which represents employees, said staff were not to blame for the sector's crisis, and "great fear and deep uncertainty" were spreading across company factories and offices.
Volkswagen's works council called on Blume to address speculation around job cuts and plant closures by a Friday deadline, warning of further extraordinary staff meetings in the months ahead if he did not.
"Not a word about production, not a word about employment," said German automotive industry analyst Ferdinand Dudenhoeffer.
"One could also say that uncertainty remains — which is not good for customers, employees and investors."
Car plants expected to cut output
Under Blume's last restructuring deal, unions secured a commitment from management to avoid German plant closures, prompting Volkswagen to seek alternative uses for underutilized sites.
Those efforts include a long-running search for a defense-sector partner for the Osnabrück factory and the possibility of producing models designed for the Chinese market in Germany.
Mobility Global data seen by Reuters estimates the group's German car plants will operate at 81 percent of standard capacity in 2026. That figure is expected to fall to 73 percent by the end of the decade, even after the anticipated removal of Osnabrück from the network.
Among the four sites threatened with closure, Zwickau is forecast to have the highest utilization rate in 2026 at 88 percent, which is expected to fall to 42 percent by 2030, the data showed.