Volkswagen braces for boardroom showdown over cost-cutting plan
Employees of Volkswagen Sachsen GmbH stand with Saxony’s Minister of Economy Dirk Panter (SPD, M) in front of the gate of the Volkswagen factory.
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volkswagen The embattled auto giant is gearing up for a high-stakes boardroom showdown after reports it is considering closing four German factories and cutting up to 100,000 jobs.
German lawmakers and powerful labor unions are strongly opposed to the mass layoff plan, which would represent the most radical overhaul in the company’s nearly 90-year history.
The separation set the stage for what is shaping up to be this year’s most anticipated corporate event in the German industry, where Volkswagen management will seek to win the approval of the firm’s supervisory board on July 9.
According to the regulation, the audit board will be required to sign the cost reduction application. Manager Magazinereported the first news of the firm’s restructuring plans on Friday.
Volkswagen’s notoriously complex board structure means the company’s management faces a bumpy road ahead, auto analysts said.
A Volkswagen spokesman declined to comment ahead of the July 9 meeting. The company previously declined to comment on reported layoffs and factory closures, saying decisions would be made and approved by relevant governing bodies.
“The entire Group, including its brands and subsidiaries, needs to undergo fundamental change,” a Volkswagen spokesman said.
Europe’s largest automaker has already laid out plans to implement sweeping layoffs and launch a major product push to counter pressures ranging from US import tariffs to increased competition from Chinese car brands.
But the latest reported layoffs will be double the 50,000 layoffs previously announced and are now claimed to include the closure of four German factories (Hanover, Zwickau, Emden and the Audi plant in Neckarsulm).
Volkswagen Law
Thomas Besson, head of automotive research at Kepler Cheuvreux, said Volkswagen management must show at the supervisory board meeting on July 9 that there is no alternative to these measures.
“It will be a very complex move to implement,” Besson said, especially considering that the German state of Lower Saxony, where Volkswagen is headquartered and operates multiple facilities, is the major shareholder.
The state, which has 20% voting rights in Volkswagen, has significant influence over the company, partly due to the Volkswagen Law. This decades-old measure turned the company into a joint-stock company, effectively limiting management’s authority to close facilities.
“They have no choice but to adapt. It’s going to be a very complex process for its stakeholders, and so it’s also a challenge for VW management right now,” Besson told CNBC.European Early Release” on Wednesday.
A Volkswagen Sachsen GmbH employee stands with his arms crossed in front of the door of the Volkswagen factory.
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Volkswagen’s General Works Council and German industrial union IG Metall have vowed to push back against reported layoffs and plant closures. “If such plans are put forward, we will block them with all our might,” they said in a joint statement, according to a translation. they said.
Volkswagen’s decision to weigh layoffs and plant closures was also met with fierce opposition from Chancellor Friedrich Merz’s coalition government, which is struggling with historically low approval ratings.
German government spokesman Stefan Kornelius in question The government’s ultimate goal is “to protect the location of German manufacturers and guarantee employment,” the government said at a press conference on Monday, according to the translation.
Volkswagen reached an agreement with unions in late 2024 to prevent factory closures in Germany and eliminate compulsory layoffs by the end of 2030.
‘A strategic step’
Rico Luman, senior sector economist focused on transportation and logistics at ING, said resistance to Volkswagen’s reported restructuring plans has paved the way for a tumultuous period of negotiations.
“It’s very complicated, but it’s clear that something has to happen. So the oversight board also needs to be aware of the urgency,” Luman told CNBC via video call.
Luman stated that the difficulties faced by Volkswagen are indicative of the difficulties faced by the European automotive industry in a broader sense, touching on the difficulties encountered on the path to full electrification, competition with Chinese automobile brands and export problems in major markets.
Volkswagen’s shares so far this year.
“They’re still profitable, right? But the reported plans are to prepare for declines or losses in the next few years. So this is a strategic step for what’s to come,” he added.
Volkswagen shares were down slightly on Wednesday, trading at levels not seen since the summer of 2010. The stock, which has fallen nearly 33% year-to-date, has hit a 52-week low since news of the accelerated restructuring first emerged last week.
