Volkswagen plans 100,000 job cuts and 4 German factory closures

Volkswagen is engineering the deepest restructuring in its 89-year history, targeting 100,000 job cuts and the closure of four German plants as it confronts the cost of its EV transition.

Volkswagen plans to cut as many as 100,000 jobs worldwide and close four German factories, Manager Magazin reported Friday, in what would be the deepest restructuring at Europe's largest automaker.

"The group needs a fundamental overhaul to remain competitive in the EV era," the magazine reported, citing sources familiar with the plans being developed by Chief Executive Officer Oliver Blume and Chief Financial Officer Arno Antlitz.

The job cuts, equivalent to roughly 14 percent of Volkswagen's global workforce of about 677,000, would be phased over several years. The company also plans to reduce capital expenditure by about 15 percent to just over €130 billion ($148 billion) over the next five years. Production at the four German sites — Hanover, Zwickau, Emden and Audi's Neckarsulm plant — would cease as current vehicle models are phased out.

The restructuring underscores the mounting pressure on traditional automakers to cut costs as they pour billions into electrification while facing intensifying competition from Tesla Inc. and China's BYD Co. The factory closures in Germany, where Volkswagen employs about 295,000 people, could trigger a political backlash in a country already grappling with industrial competitiveness concerns.

Spinning Off Core Operations

Under the restructuring plan, Volkswagen's namesake core brand and its parts-manufacturing operations would be spun off from the current group structure and incorporated into separate legal entities, the magazine reported. The move would give each business unit greater operational independence and the ability to pursue its own financing and strategic decisions.

The reorganization effectively redraws Volkswagen's corporate boundaries, separating the mass-market VW brand and the components business from the group's holding structure. The VW brand has long struggled with lower margins than premium peers such as BMW AG and Mercedes-Benz Group AG, weighed down by Germany's high labor costs and the enormous investment required for the EV transition.

Factory Closures Hit EV Production Hub

The planned closures target some of Volkswagen's most significant German production sites. The Zwickau factory was converted at a cost of about €1.2 billion to become Volkswagen's first dedicated EV plant, producing the ID.3, ID.4 and ID.5 models. The Emden plant also shifted to EV production in recent years. Hanover primarily builds commercial vehicles, while Audi's Neckarsulm facility produces higher-end models including the A6 and A8.

The closures represent a stark reversal for Germany's industrial heartland. Volkswagen has not closed a German plant in its modern history, and the move would mark the first major factory shutdowns by a German automaker since Opel's Bochum plant closed in 2014.

Volkswagen separately plans to cut 19,000 jobs in Germany by the end of this year, with a binding target of more than 28,000 job cuts by 2030, the CEO has said. Factory costs at Volkswagen's German sites are targeted to fall by more than 20 percent by 2025. The company declined to comment on the Manager Magazin report.

For investors, the restructuring raises questions about Volkswagen's ability to fund its EV transition while shrinking its cost base. The company's EV lineup has struggled to gain traction in China, its largest market, where local rivals including BYD and Nio Inc. have captured market share with lower-priced models. Volkswagen's shares trade at about 4 times forward earnings, a discount to Tesla at 65 times and BYD at 18 times, reflecting the market's skepticism about the turnaround plan's execution.

This article is for informational purposes only and does not constitute investment advice.