Volkswagen’s Supervisory Board overwhelmingly rejected the turnaround plan proposed by Chief Executive Oliver Blume, leaving the CEO scrambling to come up with an alternative to pull the world’s second-largest automaker’s crumbling empire back into shape. More from Headlight.News.
VW will halt two of four assembly lines in Wolfsburg.
Volkswagen CEO Oliver Blume had hoped to make a major announcement this week, revealing the details of a widely anticipated turnaround plan aimed at shoring up the companies worsening financial picture.
Instead, Blume is heading back to the proverbial drawing board after his proposal – which included the closure of four assembly plants – was rejected by 12 of 19 members of the automakers Supervisory Board. It had already received an angry response from the company’s powerful German union IG Metall.
Blume tried to downplay the rejection and leave open the possibilities to find a more consensus-building alternative during an interview on Sunday with the German newspaper Bild. “There are smarter solutions,” he said,
A harsh rejection
Workers roundly rejected the idea of VW closing four German plants.
As Headlight.News reports two weeks ago, Blume’s plan for the Volkswagen would have become be the largest restructuring plan in automotive history, impacting as many as 100,000 workers and shuttering four plants. There was even the possibility that the Group would spin off the very brand at the core of the enterprise, Volkswagen itself.
At the heart of the problem facing the company wasn’t a question of sales numbers. The Volkswagen Group sold just short of 9 million vehicles worldwide last year, a modest 0.5% decline from 2024 – and still enough to position it as number two among all automakers.
“Our products are highly popular, we just aren’t making enough money from them,” Blume said in the Sunday interview “That is why we must continue to cut costs — in every area.”
Among other things, VW appears to be studying an alternative approach that would have it cut as much as half of the individual models it currently sells.
What’s new
VW Group CEO Oliver Blume now has to come up with a new turnaround plan.
Blume is personally feeling the heat. Since he moved into the CEO role on September 1, 2022 the automaker’s shares have been in near freefall, losing about 60% of their value.
It’s not that he hasn’t tried to put the corporate house in order. An earlier plan implemented by the CEO reduced average costs by about 20% at VW’s core German operations, the CEO added, calling that “strong progress.” But it isn’t strong enough to bring VW into a competitive profitability position.
The automaker is also facing a variety of headwinds that threaten to worsen its financial standing, from the growing power of China’s domestic automakers to the tariffs on imported autos and auto parts enacted by U.S. Pres. Donald Trump.
Before the proposal was rejected by VW’s top management, Blume said it was aimed at “positioning the group to be even more robust and competitive, even in a highly challenging global environment.”
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Now what?
One report suggests VW could drop low-profit products like the Jetta.
Not everyone bought into the CEO’s doom-and-gloom scenario, especially IG Metall’s representatives who, by law, hold a powerful role in the management of the automaker. Making matters worse, the union works council bitterly complained they were largely left out of the planning stage and didn’t have all the details of the Blume plan before it went to the Supervisory Board.
The CEO, the council wrote on Saturday, July 11, “has evidently not deemed it necessary for weeks to share the key facts regarding his future plan with tens of thousands of deeply unsettled — indeed, frightened — employees.”
It appears that Blume has now taken off the table the idea of closing any more plants than had been covered by last year’s cost reduction program. Instead, reports from Europe indicate the company may simply eliminate individual model lines that aren’t generating an acceptable profit margin.
According to unconfirmed reports out of Germany that could mean up to half of the products sold by brands including not only VW, but entry-level SEAT and Skoda, highline Audi, Porsche, Bentley and Lamborghini. The reports named 10 models at risk, including familiar nameplates like the Volkswagen Jetta and Porsche Taycan.
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