VW Board Rejects Blume's Plan to Cut Jobs

Volkswagen Group’s supervisory board voted down CEO Oliver Blume’s proposed restructuring plan on July 8th by a vote of 12-7. The plan aimed to streamline the company by closing four German plants—Hanover, Emden, Zwickau, and Audi’s Neckarsulm site—and cutting up to 100,000 jobs by 2030. This proposal faced strong opposition from unions and key shareholders.

The restructuring plan was presented amid significant challenges for Volkswagen, including high costs, excess plant capacity, Chinese competition, and tariffs on car imports into the United States. The company’s supervisory board includes representatives from owner families, unions, and the state government of Lower Saxony, complicating decision-making. Blume faces perhaps his biggest test as CEO this week.

According to TimesLIVE, Volkswagen may need to cut about 50,000 more jobs to match the competitiveness of rivals. In an internal memo seen by Reuters, CEO Oliver Blume confirmed for the first time that the carmaker is looking to reduce up to 100,000 positions. The company has already agreed to 50,000 job cuts across the group, including its Porsche and Audi subsidiaries.

IG Metall, the influential staff union, organized demonstrations involving shop stewards and union council members at 18 sites across Volkswagen's plants in Germany from 11:20 AM to 2 PM local time on Thursday. Protests targeted factories producing cars for Volkswagen and other brands in the manufacturing group, including Audi, Porsche, and Man.

Christian Benner, chair of IG Metall, told Blume that he cannot “pass the buck for failures of recent years onto the workforce.” The union's actions send a clear signal to the board as it reviews the wide-reaching plans leaked last month. Volkswagen employs more than 650,000 people across all its brands and has been hit hard by growing Chinese competition.

The presentation by Blume’s team comes after the car trade representative body, the VDA, predicted potential employment collapse across the sector in Germany unless “bold decisions” were taken. The company is also reviewing its sprawling structure and may carve out or spin off its core brand division and components technology business.

Blume told staff on Monday that proposals for a sprawling restructuring was “the most comprehensive realignment in the company’s history” and revolved around “12 initiatives, approximately 150 pages and 45 individual resolutions” for change. In his most detailed explanation of the management blueprint for the future, Blume told staff that “despite some decidedly controversial decisions” on the table, he had perceived “broad support on the supervisory board” of his analysis of the group’s future and the need for action.

Blume joined Audi at 28, working as a planner in its body shop and paint operations, before rising through the ranks to head Porsche and then taking on the leadership of the entire group in 2022. He said he was “doing everything in his power” to keep the company competitive enough to survive. He promised to enter into “constructive discussions” with staff.

The 2024 program to reduce the workforce by 50,000 jobs is already taking place in a “socially responsible manner” involving voluntary redundancy packages and partial retirement arrangements. The company has already cut 37,000 jobs from the workforce through these schemes, but a second phase of cuts aimed at reducing overheads was now necessary.

Blume said that a further 50,000 jobs may now be cut if the carmaker’s costs were not reduced. He confirmed there was still a question mark over four factories, three Volkswagen plants - in Emden, Hanover and Zwickau – and the Audi plant in Neckarsulm, where production is scheduled to end between 2031 and 2034.

The group intends to reduce production of cars from a pre-pandemic level of 12 million cars a year to 9 million. In the past two years, Volkswagen has already reduced production by 2 million units, with another 500,000 units to be cut from production in China.

Blume said the company “must continue on this path” of reducing overheads by 20% at its factories, including cutting half of its model lineup, especially the variants of different brands. The company is also exploring alternative options for factories to secure jobs. He said it was still in advanced discussions about the transformation of its factory in Osnabrück from automotive to defense production.