Confronted by a collapsing market share in China, regulatory tariff walls, and high domestic manufacturing costs, Volkswagen executives tried to push through a brutal restructuring plan.
For decades, China was Volkswagen’s primary profit engine. Volkswagen’s sales in China plunged by 36.6 percent in the second quarter of 2026 alone.
While the company managed minor single-digit gains in North America (+7.7%) and Western Europe (+1.8%), they were nowhere near enough to offset the double-digit slide in Asia. Domestic Chinese manufacturers like BYD are rapidly outmaneuvering VW’s aging internal combustion lineup and slow-selling ID-series electric vehicles with cheaper, tech-heavy alternatives.
Facing reality, Blume and CFO Arno Antlitz presented a proposal to the board that would have resulted in the most dramatic corporate downsizing in the company’s 89-year history. According to German media, the plan aimed to:
Slash 100,000 jobs globally (representing roughly 15% of VW’s 657,000-strong workforce).
Shut down four major German factories by 2034, including high-profile sites like Zwickau (VW’s flagship EV hub), Emden, Hanover, and Audi’s Neckarsulm facility.
Shift remaining production to lower-cost Eastern European regions, potentially selling off portions of the shuttered German plants to defense contractors.
However, at a highly anticipated supervisory board meeting, representatives from Germany’s powerful IG Metall union and the state of Lower Saxony blocked CEO Oliver Blume’s sweeping cost-cutting proposal in a 12-7 vote. Under Volkswagen’s charter, the state of Lower Saxony-which holds a 20% voting stake-and labor union representatives hold a combined majority on the supervisory board.
From there, Volkswagen’s executive team was forced to pivot. Late on Thursday, the company released a watered-down “Future Plan” containing measures that do not require supervisory board approval.
VW Group will attempt to find its savings by aggressively scaling back its product catalog:
Global production capacity will be cut to 9 million vehicles per year, down from the current 10 million ceiling (and a pre-pandemic high of 12 million).
The global model lineup-which currently spans a dizzying array of vehicles across mass-market and luxury brands like VW, Skoda, Seat, Audi, Porsche, and Lamborghini-will shrink by up to 50 percent.
Configurable options and build complexity will be slashed by up to 75 percent, meaning buyers will face significantly fewer packages, trims, and individual options.
Internal technology divisions handling software, platforms, and electronic architectures will be merged to eliminate redundant “parallel structures” between Western and Chinese development teams.