Volkswagen is poised for a major organizational restructuring, risking the layoff of 100,000 employees and the closure of four factories to cope with competition from Chinese automakers.

Volkswagen is considering its largest restructuring plan in decades, which could lead to the layoff of up to 100,000 jobs and the closure of four plants in Germany to accelerate cost reductions in response to competition from Chinese automakers.

On July 8, 2569 at 15.05:XNUMX p.m., Bloomberg News reported that Oliver Blume, CEO of Volkswagen AG, is preparing to propose one of the largest restructuring plans in the company's post-war history. At a meeting of the Supervisory Board at its headquarters in Wolfsburg on Thursday, the focus was on reducing costs and enhancing competitiveness amid increasing pressure from Chinese automakers expanding into the European market.

The plan could lead to job cuts of up to 100,000 and the closure of four factories in Germany. These include Zwickau, Emden, Hanover, and Neckarsulm. Although this proposal still needs approval from a committee composed of union representatives and the Lower Saxony state government, which holds significant voting power and a strong stance of protecting employment.

Volkswagen management saw that This restructuring is necessary because the problems facing the company are not just due to economic cycles, but to structural changes in the automotive industry, particularly competition from Chinese electric vehicle manufacturers, led by BYD and Chery, which are rapidly expanding their market share in Europe. At the same time, the Chinese market, once a key source of profits for Volkswagen, is facing fierce competition, resulting in significantly declining profits, even as the company accelerates the development of new models with local partners.

Analysts from UBS. specify that The German automotive industry is entering a period of major restructuring. Shrinking sales in China and the growth of Chinese manufacturers in Europe are forcing companies to accelerate cost reductions and improve operational efficiency.

High costs in Germany - company valuations shrink.

Volkswagen's current market value is only €38,600 billion, the lowest in over 10 years, and less than a fifth of Toyota Motor's. Toyota sold over 11 million vehicles last year, compared to around 9 million for Volkswagen.

Analysts from Jefferies pointed out Volkswagen's production costs at its German plants are approximately three times higher than in countries like Portugal, Romania, and Spain, leaving the company with significant room to reduce costs.

Preparing to reduce the number of car models and decentralize administrative power.

Bloom's plan also includes reducing organizational redundancy through an eight-point plan focused on eliminating duplicative projects, reducing unnecessary technology investments, and empowering executives in each region.

Another measure likely to receive approval is to reduce the number of vehicle models and variants from the current around 150 to approximately 100, in order to save costs and reduce product redundancy.

Meanwhile, affiliated brands like Porsche and Audi are in the process of developing their own business rehabilitation plans, details of which are expected to be revealed later this year.

Trapped in the management structure.

However, Volkswagen's major challenge lies not only in its business plan but also in its management structure, which allows labor unions and the Lower Saxony state government to jointly dictate the company's direction, often resulting in delays in strategic decision-making.

The agreement with the trade unions in 2567 also clearly stipulates that the company cannot force layoffs and limits job cuts for the Volkswagen brand in Germany to no more than 35,000 positions by 2573. This means management may have to resort to voluntary resignations, reduced investment, demotions, and redirection of production capacity instead of immediately closing factories.

The report states that if the board does not approve the key plan, management is considering the possibility of calling an extraordinary shareholders' meeting to seek direct support, a move unprecedented in the company's history.

Betting on the future of Volkswagen.

While Volkswagen may not face an immediate crisis if its restructuring plan fails, experts believe the real risk lies in the company having to bear the burden of unprofitable factories, brands, and costs while Chinese manufacturers continue to aggressively seize market share.

Moritz Shularic, Director of the Kiel Institute for the World Economy. Warning that While the automotive industry and autonomous driving technology remain crucial to the German economy, it is uncertain whether Volkswagen will still be the right company to lead the country in competing in this industry in the long term. By stating that "I'm rather doubtful whether Volkswagen is still a worthwhile bet."

refer : www.bloomberg.com

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