Volkswagen's warring stakeholders put aside their differences this week to approve a landmark turnaround plan. But the deal sets the state for new battles likely to test the fragile peace.
The German automaker said late Thursday that its powerful unions and state shareholder, which together have a majority of seats on its supervisory board, had signed off on plans to double job cuts to 100,000, halve its model portfolio and trim its sprawling portfolio of businesses.
The surprise move sent Volkswagen's shares up more than 6% on Friday. Analysts broadly welcomed the effort to bolster a business under pressure from rising Chinese competition and President Trump's tariffs.
Like any peace treaty, however, the truce at Volkswagen relied on withdrawn threats, delayed decisions and a very carefully worded joint declaration.
Securing union support for a plan to shrink the business meant putting some of Chief Executive Oliver Blume's most contentious plans on hold.
The CEO had argued that four of Volkswagen's core German assembly plants were too expensive to justify making cars in the 2030s. In Thursday night's agreement, the supervisory board acknowledged the point-but stopped short of approving their closure.
Instead, the company will assess alternative uses for the four plants as part of a broader review of the company's production strategy.
The other key concession concerns a seemingly arcane detail of group structure.
Blume's original plan included the potential creation of a separate legal entity for Volkswagen's namesake car brand and associated subsidiaries, according to people familiar with it. The existing Volkswagen AG-which is currently both a carmaker and the owner of other companies including Audi and Lamborghini-would then have become a conventional holding company.
But the unions and the state of Lower Saxony, the company's government shareholder, worried that shaking up the structure-and hence the governance arrangements for Volkswagen's core North German factories-might loosen their grip on the parts of the business they most wanted to control.
In his back pocket, Blume had the option of pushing through the change by taking it directly to shareholders via an extraordinary general meeting. The approach would have been a direct assault on the German principle of "co-determination"-joint management by representatives of both owners and workers-championed by Volkswagen's unions.
In the final agreement, the supervisory board only asked Blume and his team to "develop a model for an evolved decision-making and group structure," postponing the power struggle to another day.
"Plans to spin off the core Volkswagen passenger-cars brand and the VW components division are off the table," union bosses Daniela Cavallo and Christiane Benner said in a statement. "The attack on co-determination structures has thus been successfully repelled."
The questions left unanswered by Thursday's agreement could trigger fights further down the road, analysts warned.
"This is a major step in the right direction for VW, yet unlikely the last one. Major issues regarding corporate structure and governance remain unresolved," said Oxcap Analytics' Stuart Pearson in a note.
Volkswagen's supervisory board had initially rejected Blume's plan at a meeting in July, triggering two months of high-profile wrangling between the CEO's team, worker representatives and Lower Saxony.
As recently as Wednesday, it looked like Blume was heading for a legal showdown with the often-fractious supervisory board to push through the restructuring.
The first kernel of a potential agreement emerged that evening, when the CEO met with key representatives of the supervisory-board factions, according to a person with knowledge of the events.
The provisional pact was then fleshed out in a wider circle on Thursday, when a meeting among leading supervisory-board members was already scheduled to prepare for the wider meeting on Friday. The compromise reached seemed solid enough to call in the remaining members of the supervisory board later that day to seal an early deal.
While the deal addresses some of Volkswagen's internal problems, it does nothing to soften the external challenges the company faces, notably the rise of Chinese automakers.
Market-share losses to Chinese rivals will likely be compounded by the cuts to Volkswagen's model lineup, noted Citi auto analyst Harald Hendrikse.
Thursday's pact reaffirmed Blume's key financial targets, including a huge reduction in capital spending and a 9% operating margin by 2030. In the first half, Volkswagen's margin was 3.8%.
"Whilst we applaud this target, it is clear to us that investors will not assume this to be credible until VW makes more positive progress," said Hendrikse.
Even after Volkswagen's share price rally Friday, the stock is still trading close to 16-year lows.
"The work is just getting started," said Cavallo, the union boss.
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