Report: Cost-cutting plans could cost Volkswagen billions

According to a report, Volkswagen estimates that cutting tens of thousands of jobs and potentially closing plants in Germany will cost up to 16 billion euros. VW expects costs of up to 10 billion euros for the planned job cuts alone through 2030, as reported by the news magazine “Der Spiegel,” citing last week’s supervisory board resolution and other internal documents. The funds are earmarked, among other things, for partial retirement, severance payments, and social plans.

According to the report, the management team led by VW CEO Oliver Blume estimates a total of around two billion euros for a possible halt to car production in Emden and Zwickau in 2031. For the commercial vehicle plant in Hanover and the Audi site in Neckarsulm—which face closure in 2032 and 2034, respectively—Volkswagen estimates costs of about two billion euros for each. However, by early 2037, the savings on salaries alone would have offset these costs. A VW spokesperson declined to comment on the figures.

It was initially unclear how realistic the calculation is. Employee representatives estimate the costs to be significantly higher. They cite the closed Audi plant in Brussels as a comparison: The shutdown of that plant, which employed just over 3,000 people, cost the Ingolstadt-based company around 1.6 billion euros. However, significantly more people work at the four locations now under threat.

VW Faces Historic Restructuring

Last week, the automaker’s supervisory board unanimously approved a “plan for the future” presented by the executive board. The measures are intended to make the group more robust and competitive. According to the plan, this is the “most far-reaching transformation program” in Volkswagen’s history. The plan’s core financial goal: The Executive Board is aiming for a significantly higher return on sales by 2030. For every 100 euros in revenue, nine euros in operating profit are expected to remain. At the end of the first half of the year, that figure was 3.80 euros. 

To achieve this, the group must become significantly more efficient and cut costs substantially. The Executive Board therefore plans to cut 50,000 jobs over the next few years—in addition to previous plans. Half of these cuts could affect Germany. However, specific layoff plans must still be negotiated with employee representatives.

Future of the Plants Uncertain

Furthermore, the Executive Board currently sees no competitive future for the VW plants in Emden, Zwickau, and Hanover, as well as the Audi site in Neckarsulm. The Supervisory Board has taken note of this. However, no decisions on closures have been made. Instead, a plan for a competitive European production structure is now expected to be in place by mid-2027. For the four threatened sites, “alternative uses are being examined in parallel and as a supplement,” the company said.