The CEO of Volkswagen AG has confirmed in an internal memo that the company plans to cut 50,000 jobs. This move underscores his firm commitment to reducing costs, even in the face of opposition from the supervisory board.
The memo distributed to all employees by Oliver Blume marks the first time the CEO has publicly addressed this new large-scale workforce reduction plan. When combined with previously announced plans, the total number of job cuts at Volkswagen would reach 100,000, potentially making it one of the largest layoff programs in corporate history.
The Volkswagen supervisory board held a meeting on Thursday. Due to strong opposition from the board members representing the labor union, the directors present were unable to reach a consensus on this aggressive downsizing plan. However, following the supervisory board meeting, the company announced it would halve its vehicle model lineup, and consultations regarding the job cuts will continue to advance.
In the internal memo, Blume stated that compared to its automotive industry peers, Volkswagen's management and operating costs are approximately 20% higher.
He noted, "Personnel costs account for half of the total operating expenses. Under a theoretical calculation assuming personnel costs remain unchanged, this translates to a need to cut around 50,000 jobs globally."
Volkswagen had previously announced a plan to reduce its workforce by 50,000 across the Volkswagen brand, Audi, and its software subsidiary Cariad by 2030.
Blume revealed that to adapt to declining market demand, Volkswagen will reduce vehicle production capacity in Europe by 500,000 units, and the group may even close four of its factories in Germany.
The CEO indicated he aims to avoid costly factory closures where possible, preferring instead to sell unused plant facilities to other manufacturers, such as defense contractors.
Investors have already raised doubts, questioning whether Blume has provided sufficient detail on the implementation of his restructuring plan. Following the supervisory board meeting, Bernstein analyst Stephen Reitman stated in a research note that some investors view the current consultations as similar to negotiations in 2024, which ultimately did not lead to the closure of any major plants.
Blume believes Volkswagen's current business model, which heavily relies on exporting vehicles from Europe to global markets, is no longer sustainable, as traditional automakers face increasingly fierce competition from car manufacturers in other countries.
However, Blume faces significant challenges in securing support from labor union representatives, who hold considerable influence on the supervisory board.
The union has publicly criticized the restructuring plan, stating that market rumors about a massive additional round of layoffs have already caused a "severe breakdown of trust" between employees and management.
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