50,000 jobs cut, 4 German plants axed: Inside Volkswagen CEO’s historic overhaul

Frankfurt: Volkswagen’s board of directors on Thursday approved a major cost-cutting initiative that will eliminate 50,000 jobs, halve the carmaker's model portfolio, and cease vehicle manufacturing at four German facilities.

The strategy presented by Chief Executive Officer Oliver Blume, designed to counter cheap competition in China and trade pressures from US tariffs, overcame opposition from staff representatives and the regional government, which retains an ownership stake in the firm.

“This is a strong signal for the future of Volkswagen Group,” Blume said in a statement, adding that the plan would “make our iconic brands even more attractive, stronger and competitive.”

The blueprint outlines reducing the total range of models by roughly 50 per cent. Volkswagen noted it currently has excess manufacturing capacity of 500,000 vehicles in Europe and that “a competitive future production allocation ... cannot be secured” for facilities in Emden, Zwickau, Hanover, and Neckarsulm, though alternative options will be considered.

The board statement confirmed an “adjustment of the employee numbers of around 50,000 positions,” covering executive roles as well.

Consolidating the vehicle line-up is intended to yield higher production volumes per model, thereby lowering fixed overheads. The initiative also demands “leaner leadership structures and shorter lines of decision.”

Thursday’s announcement included a statement from chief staff representative Daniela Cavallo, who called the agreement “a necessity for our company to move successfully into the next decade without the associated undertakings coming only on the side of the employees.”

Cavallo had previously voiced harsh criticism of the proposal when details emerged over the summer. Employee delegates occupy half the seats on the supervisory board, whilst the government of Lower Saxony, where Volkswagen is based, holds two seats.

Lower Saxony Governor Olaf Lies stated that the enterprise was confronting “enormous” difficulties and that the agreement marked “a shared path toward the necessary transformation.”

Volkswagen, which employs approximately 650,000 workers worldwide, posted a 30 per cent decline in net profits for the first half of the year following weaker sales figures in China. Alongside its namesake brand, the automotive group's portfolio features Audi, Skoda, Porsche, and SEAT.

AP