Jack Ewing, Theresa Rauffmann and Jim Tankersley
Updated ,first published
Volkswagen says it will cut the number of models it offers by as much as half to cut costs and better compete with Chinese companies. But the German carmaker did not say what the changes would mean for workers who have been seeking major job cuts and factory closures.
The plan, released after a board meeting, appeared to be a tacit admission that the company was too big and complicated, and needed to shed weight to survive the global shift from gasoline to electric vehicles, a transition that has upended many automakers and fueled the rise of Chinese automakers.
“Geographic and political tensions, rising costs – primarily driven by taxes – growing regulatory requirements and a competitive global environment are intensifying the challenges facing the automotive industry in an already far-reaching phase of transformation,” Volkswagen said in a statement.
In recent days, German media reports suggested that the company was preparing to cut 100,000 jobs by the end of the decade and close four plants in Europe.
Such a reduction in speed would be out of character for Volkswagen and the German industry, which tends to favor slow change. Trade union representatives and political leaders from the German state of Lower Saxony have a 20-strong majority on the company’s management board and had signaled they did not support deep cuts.
In Neckarsulm, southwest Germany, where 15,000 workers assemble models for Volkswagen’s luxury brand Audi, residents fear the plant’s closure could damage a local economy built around the rhythms of factory shifts.
“If Audi dies, everything here dies,” said Cayli Halin, 54, who works in the plant’s testing center.
Left open by Thursday’s announcement is how many of Volkswagen’s 657,000 workers worldwide could lose their jobs as the company cuts production. The company’s profit fell 28 percent in the first quarter to €1.6 billion ($2.64 billion) and its sales were down 2 percent.
Volkswagen’s Porsche division, which has traditionally provided the lion’s share of profits, has been hit by US President Donald Trump’s 25 percent tariff on imported cars. Porsche sports cars and sports utility vehicles are manufactured in Germany and exported to the United States, one of the brand’s most important markets.
Volkswagen’s troubles are an ominous sign for Western and Japanese automakers. To varying degrees, both are struggling with changing technology and competition from Chinese manufacturers such as BYD and Geely that sell cars loaded with luxury features at low prices.
In the European Union and the United Kingdom, Chinese carmakers combined sold more cars in May than Japanese carmakers, according to data from the European Automobile Manufacturers Association.
Encouraged by government subsidies, Chinese automakers began focusing on electric vehicles years ago, an investment that has paid off as more Europeans buy such models. About one in five new cars sold in Europe is electric, and sales have soared this year due to rising oil prices caused by the war with Iran.
Volkswagen is particularly vulnerable because for years most of its profits came from selling cars in China, where it was once a major automaker. The company’s sales in China fell 20 percent in the first quarter after a steep decline for several years.
Fears of plant closures have gripped Germany, where the car industry – and Volkswagen in particular – occupies a hallowed place in the national consciousness and is a pillar of the national economy.
Chancellor Friedrich Merz and his government have tried to boost the industry with new subsidies and by pushing EU officials in Brussels to loosen auto regulations, among other measures, in hopes of helping German automakers better compete with Chinese rivals.
Merz did not comment on the rumored layoffs at Volkswagen ahead of Thursday’s board meeting, but a spokesman, Stefan Kornelius, told reporters last week that “our goal is to prevent plant closures in Germany”.
Ali Alp Cagan, 31, has worked as an information technology specialist at Audi for almost two years and is not personally worried about layoffs because he considers his career prospects strong.
“In general, however, the situation is already worrying,” he said.
Cagan and other workers leaving the factory for the recent changes blamed the company, saying it has failed to innovate and that China is now making cheaper and better cars.
This article originally appeared in New York Times.
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