Volkswagen is approaching a defining moment as CEO Oliver Blume prepares to unveil sweeping restructuring plans to employees in a series of extraordinary works meetings following the end of summer plant closures.
Blume aims to sharply reduce costs, eliminate excess production capacity and shrink the model lineup, targeting an operating margin of 8% to 10% by the end of the decade. Current profitability stands at 3.8%, which he described as solid but insufficient to fund future technologies and products sustainably. The group is described as overstaffed, slow-moving and overly complex, requiring a clear mandate from the supervisory board to execute the transformation.
The plans face immediate resistance. At a July supervisory board meeting, employee representatives and Lower Saxony’s state government opposed key elements, including potential closures of multiple German plants. The state holds a blocking minority under VW’s governance law, which also requires a two-thirds majority for decisions on factory relocations. Worker leaders have dismissed the proposed margin targets as unrealistic and rejected any plant closures outright.
Family shareholders, led by Porsche SE—whose stake in VW accounts for a significant portion of its balance sheet and dividend income—have pushed for decisive action. Porsche SE chairman Hans Dieter Pötsch warned that further delays would exacerbate problems, emphasizing that business and economic imperatives must take precedence. The supervisory board remains divided, with a tied vote expected at its next meeting in two weeks after the departure of a capital-side member left a vacancy.
A further point of contention is a proposal to spin off the core Volkswagen brand into a separate listed entity, which unions and the state view as an attempt to circumvent the governance protections embedded in VW’s law. Both have vowed to resist such moves.
Volkswagen’s challenges extend beyond internal restructuring. The company is grappling with U.S. tariffs imposed by President Donald Trump, a collapse in the Chinese market and intensifying competition in Europe, particularly from Chinese manufacturers in plug-in hybrids and electric vehicles. The European Union has imposed tariffs on Chinese electric cars, and Blume has called for similar measures on Chinese plug-in hybrids. Lower Saxony’s CDU leader Sebastian Lechner echoed this stance, arguing that inaction would worsen the situation.
Analysts warn that without a resolution, Volkswagen may resort to an extraordinary general meeting to hold supervisory board members personally accountable—a highly unusual escalation that remains uncertain. Daniel Schwarz of Metzler described it as a last-resort measure whose outcome is far from guaranteed.
