Last Thursday evening, Volkswagen’s Supervisory Board approved the management board’s cost-cutting plans. From the 2030s onward, production capacity in Germany is to be drastically reduced, with four plants now hanging in the balance. Germany’s industrial base is being dismantled piece by piece.
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On Thursday evening, Volkswagen’s Supervisory Board unanimously approved the company’s “Future Plan 2030.” The decision had originally been scheduled for Friday. By moving faster, Volkswagen is not only seeking to underline that the situation is genuinely serious, but also that it has recognized the danger and is now taking control of the situation again. Symbolism is everything these days, as the damage caused by the company’s business strategy of recent years has become visible like a gaping wound. Supervisory Board Chairman Hans Dieter Pötsch described the decision as evidence of the Group’s determination to transform itself and work with all its strength toward its long-term future and competitiveness, as Pötsch put it. Nevertheless, the impression remains that the Group’s consolidation course represents less a controlled downsizing than an internal corporate collapse — the twilight of an economic era.
50,000 jobs worldwide are to be eliminated by the middle of the 2030s. Social plans and early-retirement offers will probably account for the lion’s share of the workforce reduction. Volkswagen is said to be facing an overcapacity of 500,000 vehicles in Europe. The restructuring costs for the Group could amount to as much as €10 billion. VW is stumbling over social hurdles that the company itself created during the good times — German labor law prevents a rapid, situation-appropriate adjustment of corporate structures to the conditions of the market and the company’s actual economic strength.
For Germany as an industrial location, the outlook is bleak: VW’s plants in Emden, Hanover, and Zwickau, as well as the Audi plant in Neckarsulm, are likely to fall victim to the Group’s downsizing. The decision has not yet been formally made — by the end of June 2027, the company intends to clarify how the individual sites will proceed. From 2031 to 2034 onward, there will no longer be a competitive follow-up allocation of production at these plants, suggesting that VW is preparing to abandon the sites.
This is where the real problem lies: Volkswagen is no longer competitive. Excessive labor costs, excessive energy costs and rampant overregulation are driving not only carmakers but industrial production in general away from Germany.
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There is indeed an urgent need for action in Wolfsburg. The China business in particular has virtually collapsed. Overall, revenue in the first half of the current year fell slightly to €158.1 billion. The problem is that operating profit plunged by 11.6 percent to €5.9 billion, leaving an embarrassingly low operating margin of just 3.8 percent. It is the continuing negative trend that is causing concern. Volkswagen therefore does not merely have a sales problem, but above all an immense cost problem. The possibility that liquidity problems may also be becoming visible was demonstrated by the sale of the Group’s large-engine subsidiary Everllence, formerly MAN Energy Solutions: Volkswagen sold a majority stake to U.S. investment firm Bain Capital, generating proceeds of €7.4 billion.
Volkswagen — and with it the entire German automotive sector as well as energy-intensive industries more generally — has its back against the wall. As Bild reports, citing internal Volkswagen Group data, factory costs per vehicle at the Emden plant amount to €4,850, roughly 4.5 times the comparable figure at VW’s Chinese plant in Tianjin, where the figure is €1,078. Direct production labor costs are reportedly €74 per hour in Emden, compared with €12 in Tianjin — a factor of more than six.
The mistakes of the past become particularly apparent when looking at labor productivity. In Emden, the calculation comes to 29 vehicles per employee per year, compared with 51.3 in Tianjin. That corresponds to roughly 77 percent more vehicles per employee. Absenteeism due to illness also differs dramatically in the internal comparison: In Emden, the rate is 10.5 percent, compared with 1.0 percent in Tianjin. This figure is more than merely a personnel-policy issue affecting internal operations. Has the downward spiral into which the Group and the entire industry have fallen perhaps already left its mark on employee morale? In any case, this particular figure requires interpretation, precisely because it is so striking.
The consequences of Germany’s nuclear phase-out and the continued expansion of climate regulation have been discussed often enough here. Taken together, they create the impression of an ideologically driven economic suicide by a satiated society that was convinced of its own success — and must now watch as its industrial substance, the engine of prosperity, is ground down between excessive energy and labor costs, growing regulation and the merciless forces of global competition.
Volkswagen has become a victim of increasing political central planning and the permeation of the corporate landscape with environmental ideology. The lesson now is clear: corporatism and reliance on political steering do not pay off in the long run. In the end, things turn out as they always do: Others pay the bill — namely employees and investors who had placed their trust in the future of the automaker.
Image: Volkswagen Group