The European giant, while embarking ⁠on its biggest ever restructuring, citing stiff Chinese competition, US tariffs, and overcapacity, is also exploring alternatives for four German plants that will eventually run out of models during the next decade, along with a reduction of around 50,000 more positions than previously planned.

As per reports from the German magazine Der Spiegel and Reuters, phasing out production in ⁠Emden and Zwickau would cost about 1 billion euros each, while 2 billion euros each would be incurred at the Neckarsulm and ⁠Hanover plants.

About 10 billion euro would be set aside for costs related to cutting up to ⁠60,000 jobs worldwide.

However, on September 7, the automobile giant found a ray of hope, as it signed a preliminary deal with Israel’s Aurelius Capital and Volkswagen’s ⁠home state of Lower Saxony, in which the carmaker would sell its factory in Osnabrueck that will then be repurposed for defence production under the new ownership.

According to the state’s labour officials, the move could preserve about 1,400 of the Osnabrueck site’s 1,800 jobs. The vehicle production there is due to end in 2027.

According to Volkswagen, an initial “anchor project” for Osnabrueck would be a cooperation with Israel’s Rafael Advanced Defense Systems, one of the key partners behind Israel’s Iron Dome, Arrow, ‌and David’s ⁠Sling air and missile defence systems.

“These plans involve the potential manufacture of systems and components for air defence systems for Germany and Europe,” Volkswagen said, adding that the newfound cooperation could pave the way for further such deals.

According to reports, Volkswagen is also considering converting its Amarok pickup trucks into military vehicles in response to the increasing pace of defence spending in Europe.

When it comes to repurposing underused automotive plants for defence production, Volkswagen is not alone, as Rheinmetall and Continental are also pursuing similar initiatives.

Under the new arrangement, Aurelius would take a majority stake ⁠in the Osnabrueck site alongside Lower Saxony, whose premier Olaf Lies said the state’s engagement would be similar to its stake purchase in the Meyer Werft shipyard in 2024.

At the time, Lower Saxony spent 200 million euros (USD 232 million) for a 40% stake in the shipyard.

In its pursuits of becoming leaner, Volkswagen is also considering the ‌sale of Ducati, the motorcycle maker owned by the Audi division.

Giving further hints about the news, Audi CEO Gernot Dollner told Bloomberg, “Within the Volkswagen Group, we are committed to disciplined, ⁠responsible portfolio management.”

“It’s part of the evaluation ⁠process that we’ll also talk about Ducati, but ⁠nothing has been decided,” he ⁠added further.

While Volkswagen is facing intense competition in China and looking to desparately scale up its 3% market share in the United States, it is also exploring a strategic partnership with Indian conglomerate JSW Group to improve competitiveness and profitability in the world’s third-largest ‌car market.

“The partnership is aimed at expanding Volkswagen’s portfolio in India, deepening local sourcing and strengthening manufacturing,” the German giant said.

JSW Group, a steel-to-energy Indian conglomerate, entered the South Asian giant’s passenger vehicle market in 2023 through JSW MG Motor India, a joint venture with China’s SAIC Motor that sells MG-branded cars.

“The proposed collaboration will likely be structured as a two-party partnership with joint control, defined operational roles, and governance mechanisms designed to enable quicker decision-making,” Volkswagen stated further.

The duo will also explore ‌ways ⁠to increase local sourcing, share vehicle platforms, and expand production capacity.

Volkswagen, whose market share in India stands around 2%, mainly sells vehicles through Skoda Auto in the South Asian nation.

Image Credit: Volkswagen Group

The post Volkswagen faces 16 billion euro restructuring bill, weighs defence future for German plants appeared first on International Finance.

Blume is battling to streamline Europe’s biggest carmaker, whose profits have slumped as it faces billions of euros in tariff costs, stiff Chinese competition, and pressure on its domestic manufacturing network to become more efficient.

Volkswagen has ⁠already agreed to cut 50,000 jobs across the group, including its Porsche and Audi subsidiaries.

“The company must work on reducing costs further, having calculated a cost disadvantage versus comparable companies of 20%. This means a theoretical deduction of another 50,000 jobs worldwide. We are currently assessing across all brands, companies, and regions how many adjustments are actually necessary and feasible,” Blume said in the memo seen by Reuters.

The organizational restructuring plan has faced angry reactions from workers. As per the reports, during the last board meeting on July 9, labor representatives on the committee blocked the proposals, which, apart from job cuts, also pitched for the closure of four factories.

However, Blume has sounded undeterred in the latest memo, as he mentioned, “As of today, we still cannot confirm competitive use cases for the plants of Emden, Hanover, Zwickau, and Neckarsulm in the 2030s.” But he is now preferring “intelligent solutions” over ⁠closures, having pointed to the defense industry or the production of Chinese Volkswagen models in Europe as options for underutilized factories.

The ⁠company will further reduce its production capacity and gradually halve its model lineups—measures that analysts have still found inadequate for solving Volkswagen’s current woes.

“Of course, it’s understandable that not everything has been planned ⁠out down to the last detail yet and that certain issues still need to be further discussed and evaluated. There will certainly be more meetings in which we will work hard to find the best solutions,” Blume said.

As per the German business magazine Capital, the state of Lower Saxony is considering ‌taking a stake in Volkswagen’s Osnabrueck plant, a move through which the provincial administration hopes to support the plant’s transition from automotive to defense production. Volkswagen sees the transition method as the viable one for other plants, whose ‌future ⁠is under discussion.

Volkswagen has been in talks with defense companies, including Israel’s Rafael, over future prospects ⁠for Osnabrueck, where production is currently scheduled to end in 2027. To complicate things further, Volkswagen has posted an 8.6% drop in deliveries in the ⁠second quarter, the steepest fall in the automaker’s history in the last four years.

Post the board meeting, Volkswagen made no mention of job cuts or plant closures. Instead, it reiterated largely known targets to reduce complexity, measures that did not require supervisory board approval.

The model range, which spans roughly 150 lines across brands including Audi, Porsche, Skoda, and Cupra, would be gradually trimmed in the pursuit of focusing on the “most attractive market segments.” Production capacity will be reduced to nine million vehicles a year, down from 10 million currently and well below a pre-pandemic target of 12 million. So-called offering complexity, including equipment options, will be cut by up to 75%.

Germany’s largest industrial union, IG Metall, has been rallying workers at Volkswagen Group sites across Germany, urging management to present a strategy that safeguards production. While Volkswagen’s current labor agreement includes a truce against organized strikes, unions are now threatening to step up industrial action if management seeks to reopen commitments on job security.

However, the silver lining here has been both sides agreeing to the challenges the group is facing, including a severe reduction of profit margins, weakness in China, ⁠and the costs of electrification and tariffs. Reiterating that the global situation for the carmaker has been a deteriorating one over the past twelve months, Blume wants the company to become faster, more resilient, and more competitive.

Data seen by Reuters shows Volkswagen’s German plants operating at 81% of standard capacity in 2026, a figure expected to fall to 73% by the end of the decade. Zwickau, among the sites earmarked for possible closure, will likely see utilization drop from 88% this year to 42% by 2030.

Henning Gebhardt, a fund manager at HollyHedge Consult, said Volkswagen faced a “perfect storm” of weak Chinese profitability, tariffs, and stronger rival offerings, compounding pressure across the wider auto industry.

The post Volkswagen CEO doubles down on job cuts, weighs ‘intelligent’ plant overhaul appeared first on International Finance.

These estimates indicate that 16% of manufacturing jobs in manufacturing in Lower Saxony depend on the production of engines and components such as coolers, gear and exhaust gas units. This state is followed by Saarland (15%), Baden-Wurttemberg (13%), Bavaria (11%), Saxony and Hessen (10% or the national average). A below-average share of jobs would be affected in the states of Thuringia (nine percent), North Rhine Westphalia (seven percent) and the remaining German states.

This ranking of German federal states changes when it comes to absolute job numbers. The hardest hit state by a ban would be Baden-Wurttemberg (157,500 jobs) ahead of Bavaria (137,380), North Rhine Westphalia (89,350) and Lower Saxony (86,880). They are followed by Hessen with 38,530 jobs and Saxony with 27,740 jobs.

These figures are estimates by the ifo Institute, since output data (official production survey of manufacturing) is only available for Germany as a whole in the requisite product depth. If standard production structures are assumed across all federal states, the national figures for Germany can be broken down on a state-by-state basis.

More specifically, ifo’s estimates are based on the assumption that the distribution of jobs in the manufacturing of combustion and non-combustion components in individual states corresponds to that of Germany as a whole.

The original study in German can be viewed here.

The post Lower Saxony would be hit hardest by combustion engine ban appeared first on International Finance.