The Volkswagen job cuts approved by the company’s board on Thursday came with a headline figure — 50,000 more positions — and a second decision that will shape the company for longer. Volkswagen is cutting its model lineup roughly in half. The headline is about how many people work there. The second number is about what the company will refuse to build.
Start with how this company has handled a crisis before. In the early 1990s, facing a downturn and tens of thousands of surplus workers, Volkswagen negotiated a four-day week instead of mass layoffs, cutting the standard work week from 36 hours to 28.8 with adjusted pay. The arrangement lasted more than a decade. That is the template: when Volkswagen has to shrink, it usually shrinks something other than headcount first, and it does so by agreement.
The reason is structural. Volkswagen’s supervisory board — the body that has to sign off on major decisions — has 20 seats, and half of them belong to worker representatives. The German state of Lower Saxony, which holds about a fifth of the company, holds two more. This is called codetermination: a legal arrangement in which employees get board seats, not just a union across the table. It means management cannot close a plant the way a US executive can. In July, a closure plan was blocked outright. The Associated Press reported that Thursday’s approval overcame resistance from both the employee representatives and the regional government.
So this is less a cost-cutting memo than a negotiated settlement, and that is what makes the size of it notable.
Now the numbers. Volkswagen says it has excess production capacity of about 500,000 vehicles a year in Europe — factories that can build half a million more cars than anyone is buying. Auto manufacturing normally rewards scale, because fixed costs like tooling and factory space spread across more units. Run well below capacity and the same math runs backwards: the fixed cost per car goes up. Four plants — Emden, Zwickau, Hanover and Neckarsulm — will end vehicle production, with alternative uses to be explored. Operating margin in the first half came to 3.8%. In China, once the company’s most profitable market, Volkswagen lost the top spot to BYD and has slid to third — a shift driven by exactly the cost structure described in BYD’s vertical integration. US import tariffs sit on top of all of it.
Against that, the targets: roughly 9 million vehicles sold a year and a 9% operating margin by 2030.
Cutting the model range is how they intend to get there. Fewer models means development budgets and production volume concentrated on the cars that remain, instead of spread thin across a catalog. It also means Volkswagen is deciding, in advance, which customers it is willing to stop serving.
My take: A closed plant is a number you can count; a deleted model is a customer you never hear from again.
Not advice. Just how I see it.