Volkswagen has weathered wars, scandals and the reinvention of the automobile itself. But the restructuring now being fought over in Wolfsburg is of a different order: plans that could ultimately mean up to 100,000 fewer jobs and the closure of German plants — reported to include Hanover, Zwickau and Emden, along with Audi’s Neckarsulm site — in what would be the largest overhaul in the company’s 89-year history. In July, the company presented a four-year plan to shrink capacity and slim its model lineup; the labor side of its supervisory board refused to back the deeper cuts. The standoff captures, in one company, the whole crisis of the European car industry.

How it came to this

Volkswagen’s predicament has three intertwined causes. The first is China. For two decades, the Chinese market was VW’s profit machine, at times accounting for nearly half of group deliveries. That era is over: Chinese consumers have swung hard toward electric vehicles, where domestic brands like BYD offer more technology for less money, and VW’s market share there has eroded year after year. Worse, those same Chinese manufacturers are now expanding into Europe, attacking VW in its home market.

The second is the electric transition itself. VW committed massively to EVs — Zwickau was converted into a flagship electric plant — but an electric car contains far fewer parts and requires far less labor than a combustion one. Even a successful transition implies a smaller workforce; a stuttering one, with EV demand growing slower than projected and profit margins on electric models thin, is more painful still.

The third is cost. VW’s German plants carry wage and energy costs among the highest in the world, governance in which the state of Lower Saxony holds a blocking minority, and a co-determination culture that has historically made plant closures in Germany taboo — VW had never closed a German factory. Add new American tariffs squeezing exports, and a 10 percent profit decline reported in July, and the arithmetic that management presented to the board becomes stark.

The battle over the plan

The late-2024 agreement with the IG Metall union already charted the deepest cuts VW had ever accepted: around 35,000 German jobs to go by 2030 through attrition, with a target of roughly 19,000 fewer German workers by the end of 2026 already being executed. The new plans reported in June — up to 100,000 positions and four plants — would roughly double that ambition, and the labor bench’s refusal in July to endorse them shows the limits of consensus.

This is where VW’s unique constitution matters. Labor holds half the supervisory board seats, and Lower Saxony’s 20 percent voting stake has historically sided with employment. Management can trim shifts, models and investment unilaterally; closing German plants against the works council is another matter. The likeliest path, as ever at VW, is a negotiated middle: deeper cuts than labor wants, slower than management says it needs.

What it means beyond Wolfsburg

Volkswagen directly and indirectly supports a meaningful share of German industrial employment; entire regions — Emden in East Frisia, Zwickau in Saxony — are company towns. A retrenchment on the scale discussed would ripple through suppliers already shedding jobs, from Bosch to Continental, and through a German economy searching for growth. Politically, plant closures would land in exactly the depressed regions where protest parties poll strongest.

For the European industry, VW is the bellwether. If the continent’s largest carmaker — with unmatched scale and engineering resources — cannot make volume car production in Western Europe pay, the question becomes existential for everyone. The counterargument is that VW retains formidable assets: strong brands from Škoda to Porsche, a software partnership strategy to close the tech gap, and new EV models arriving at lower price points.

The stakes

The next rounds of negotiation will decide more than headcount. They will test whether Germany’s model of consensual industrial change — slower but socially stable — can handle a transformation this fast, or whether it merely delays the reckoning at greater cost. Volkswagen was founded to motorize a nation and became the symbol of its postwar economy. What it becomes next will say a great deal about what kind of industrial country Germany can remain.