Volkswagen May Discontinue Up To Half Its Current Models

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Volkswagen is in trouble. Two weeks ago, Germany’s Manager Magazin reported that CEO Oliver Blume had floated an idea to close four factories and eliminate 100,000 workers, both in Germany and around the world, by 2030. It said the plan would be made public at a company board meeting on July 9. The factories affected were said to be those in Hanover, Zwickau, and Emden, as well as the Audi factory in Neckarsulm.

If implemented, the plan — known internally as the Group Target Picture — would effectively transform Volkswagen AG into a new company, Manager Magazin said. It claimed the restructuring would eliminate about one seventh of the group’s global workforce, open the company further to capital markets, and significantly reduce employee influence. The plan would be taken up by the full Volkswagen Group board on July 9, 2026.

That meeting took place as scheduled yesterday. Afterwards, the company released this statement: “The Executive Board of the Volkswagen Group is continuing the strategic realignment of the company to sustainably strengthen its competitiveness. In today’s meeting, the Executive Board presented the Supervisory Board with a comprehensive package of measures comprising 12 initiatives and the 2030 target picture.

“In the global market environment, it is essential to make the company even more resilient, efficient and agile. The Executive Board has already begun implementing initial measures of its future plan. These include, with immediate effect, reducing complexity and variant complexity in the product portfolio, aligning products, technologies and development more closely with regional markets, adjusting capacities in the production network to market expectations, and streamlining structures and the equity portfolio.”

Oliver Blume had this to say after the meeting: “Our goal is clear: by 2030, we will make the Volkswagen Group the most attractive automotive company in the world — with iconic brands, inspiring products, leading technologies, robust financial results, reliable capital market performance and a team spirit in action.

“With our future plan, we are moving into the next phase of transformation by our own means. We are making the Volkswagen Group faster, more resilient, and more competitive through less complexity, focused technologies, an even stronger alignment of products, development and production with regional markets, the reduction of over-capacities, a streamlined equity portfolio, and significantly leaner structures. In this way, we are creating the conditions for sustained success — even in an increasingly demanding environment.”

Declining Sales In China

That is a lot of sunshine coming from on high, but down where the rubber meets the road, things are a lot less optimistic, especially for those who will be affected most by the changes. “The model lineup will be gradually streamlined by up to 50 percent and concentrated on the most attractive market segments. Offering complexity — for example, the number of available equipment options — will be reduced by up to 75 percent. This allows investments and development resources to be focused on the products and technologies that deliver the greatest added value for customers and the highest value contribution to the Group,” Volkswagen said in its press release.

The sense of panic at the upper echelons of the company is being fueled by a decline in its fortunes in China. Where once its Chinese operations brought in boatloads of profits, in the past few years, sales in China have cratered, taking those profits with them. In the first quarter of this year, sales in China plunged by 20 percent, which means the company can no longer paper over its losses in the home market with cash flowing into its corporate coffers from China.

Nightmare In Neckarsulm

One of the German plants that may cease operations under the new plan is in Neckarsulm, which assembles automobiles for the Audi brand. People there told the New York Times that closing that factory would devastate the local economy. Already the rumors have led both far right and far left political parties to protest what is happening to the German auto industry. In Neckarsulm this week, members of the Marxist-Leninist Party of Germany were passing out fliers urging workers to participate in a pre-emptive strike against any closures. Such strikes are illegal in German, at least in theory.

Local resident Harry Leinmüller said, “There are so many young people here; some have bought building plots in the countryside. Many won’t be able to pay for their houses anymore. The Chinese are faster than us and have more knowhow.” Mayor Steffen Hertwig said a plant closure would be “fatal” for the area. But he was adamant that Volkswagen wouldn’t close this Audi factory because it was too innovative. The situation, he said, “is in no way comparable to Detroit in the 1980s.”

Well, Mayor Hertwig, the factory in your city is already one of those being talked about as a possible candidate for closure. According to Manager Magazin, it will continue to build current models, but when their successors are ready, those new models will be built elsewhere. “If Audi dies, everything here dies,” an employee at the factory told the Times.

Brand Consolidation

Volkswagen does have several brands that offer very similar models — SEAT and Cupra among them. The New York Times reports that situation increases manufacturing complexity, which raises costs. In the US, GM discontinued its Pontiac, Oldsmobile, and Saturn brands; Chrysler eliminated the Plymouth brand; and Ford put its Mercury division in mothballs to control costs. Volkswagen could do something similar, it said.

And yet, there were rumors recently that Volkswagen was considering importing the Cupra brand to America and it is still moving forward with plans to create a new Scout division to manufacture rugged, off-road focused vehicles for the North American market. How this latest plan from the top levels of the company will effect either or both of those initiatives is unknown at this point.

Justification

To justify the change in direction agreed to by the board this week, Volkswagen cited dramatic changes over the last year, including geopolitical tensions, rising costs mainly through tariffs, and increasing regulatory requirements alongside growing competition. It won’t take readers long to realize that the tariffs referred to are those imposed willy nilly by the US, which have led directly to a drop in Porsche sales in America of about 25 percent.

According to CTPost, after the announcement by the company on July 9, financial research firm Bernstein wrote a note to its clients expressing skepticism. “VW stated that it is extending its technology leadership, a claim that will likely raise eyebrows given the pace of innovation among its Chinese competitors,” the note said. Part of the company’s optimism on the technology front comes from its more than $5 billion bet on Rivian’s zonal architecture.

The statements from the company following this momentous meeting have been flowery and hopeful but lack specificity. The people who work in Volkswagen factories in Neckarsulm and Zwickau will find out soon enough about those specifics as the changes from on high filter down to the local level. Oliver Blume’s fortunes will not be altered one pfennig, but thousands of loyal Volkswagen workers are about to have their entire financial world upended. The results will not be pretty.