Shares Jump as Volkswagen Agrees to Biggest Restructuring in 89-Year History

Volkswagen’s supervisory board late Thursday agreed to the biggest restructuring in the group’s 89-year history, including another 50,000 job cuts, bringing the total agreed reduction to 100,000.

The agreement ended months of internal resistance over the scale of the overhaul and sent Volkswagen shares up 7%, reaching an 11-week high.

The deal also leaves the long-term future of four German plants unresolved as management pushes through a broader effort to restore profitability.

Board Breaks Restructuring Deadlock

The supervisory board had struggled to reach agreement between shareholders, labor representatives and the state of Lower Saxony.

Management and major shareholders Porsche and Piëch had pressed for deeper cuts, while employee representatives and Lower Saxony had resisted parts of the proposal.

An earlier attempt by chief executive Oliver Blume to secure backing failed in July.

The revised plan has now secured agreement on about 95% of the measures proposed by management, with individual elements adjusted before final approval.

Volkswagen had warned internally that the group was in a “critical overall situation” and framed the decision in stark terms.

“Today WE decide on the survival of the Volkswagen Group,” management said in material presented to the supervisory board.

Another 50,000 Jobs Set to Go

The restructuring adds a further 50,000 job reductions to previously agreed measures, taking the overall figure to 100,000.

Details of where and when the latest cuts will fall have yet to be negotiated.

Blume has previously indicated that half of the savings would need to come from Germany, implying about 25,000 job reductions in the group’s domestic operations.

Management and unions will still have to negotiate implementation. Labor representatives previously secured employment protection for most German operations until 2030 under a 2024 restructuring package.

The latest internal proposal had put as many as 60,000 additional positions, including management roles, under consideration, comprising an initial 47,200 positions and another 13,000 linked to overhead costs.

Four German Plants Face Uncertain Future

The overhaul also raises questions over Volkswagen sites in Emden, Hanover, Zwickau and Neckarsulm.

The company does not currently have competitive successor production secured for those plants once existing programs end between 2031 and 2034.

Volkswagen plans to examine new products only if the sites can achieve substantial cost reductions by June 2027.

Alternatives could include new uses for the plants or operation under different ownership after current production phases end.

Volkswagen also plans to remove more than 500,000 vehicles of excess production capacity in Europe.

Margin Target Drives Sweeping Cuts

The group is planning around annual sales of 9 million vehicles by 2030, compared with almost 11 million in 2019.

Without corrective action, Volkswagen estimates its operating margin would fall to -0.1%.

The restructuring instead targets a 9% return on sales and an operating result of €30.6 billion, requiring an earnings improvement of €30.9 billion.

Investment and research spending are set to be reduced by about €50 billion.

The plan also envisages cutting the number of models by up to 50% and reducing complexity by 75%.

Other measures include revised management bonuses, potential disposals of holdings, the planned phase-out of Seat by the end of 2029 and a restructuring of Volkswagen AG into a holding structure.

Investors Welcome Deal, Execution Remains Key

The agreement removed the immediate threat of an unprecedented confrontation between management and Volkswagen’s other powerful stakeholders.

Executives had considered taking the dispute to a shareholder meeting if the supervisory board rejected the plan again.

Shareholders and analysts welcomed the group's ability to reach a decision despite its workforce of more than 650,000 and its complex governance structure.

“The agreement ... is a positive sign for Volkswagen and the capital market, even if it involves severe cutbacks amongst the workforce and within the group,” said Moritz Kronenberger of shareholder Union Investment.

“The ball is now entirely in the executive board's court. There are no more excuses,” he added.

Citi analysts also welcomed the agreement but cautioned that internal restructuring would not remove wider competitive pressures.

“We are pleased this agreement has been achieved,” they said.

The deal leaves Volkswagen with the task of translating its most extensive restructuring into savings while navigating weaker margins, pressure in China and intensifying competition in Europe.