The Principle That Built Volkswagen Has Become a Burden. Is Mass Job-Cutting Enough?

Volkswagen’s workforce, once celebrated as a symbol of German industrial power and profitability, has become a burden threatening the company’s ability to compete. The German automaker could eliminate up to 100,000 jobs, according to Manager Magazin, while the Bild tabloid has cited a figure of up to 120,000.

Employees were waiting anxiously for a decision on drastic savings measures during a lengthy supervisory-board meeting on July 9. The meeting ended without such a decision. Instead, Volkswagen referred to necessary changes and an “extensive new orientation,” according to Deutsche Welle.

“

The company develops and produces a large share of its components and software itself, which increases the need for labor and, of course, labor costs.

Volkswagen has almost 630,000 employees worldwide. Including joint ventures in China, the figure reaches about 680,000. That is roughly 60% more than Toyota, 140% more than Stellantis and nearly 240% more than Ford. The scale that once reflected Volkswagen’s strength now forces painful cuts as the company faces more agile Chinese electric-vehicle manufacturers.

“

Production costs in Germany can be twice as high as those of competitors.

The company already eliminated thousands of jobs last year as profits came under pressure. It had also planned to close four factories in Germany. The cuts affect luxury brands within the Volkswagen group, including Porsche and Audi, while Mercedes-Benz and suppliers such as Bosch face similar pressure to reduce costs.

Meghan Ostertag of the Information Technology and Innovation Foundation said Volkswagen needs more workers because it develops and produces many components and software systems itself. Labor and production costs in Germany can be twice as high as those of competitors, she said. Other experts point to Volkswagen’s aggressive acquisition strategy, which brought brands such as Škoda, Porsche, SEAT and Bugatti, as well as several truckmakers, into the group. Daniel Harrison of London-based consultancy Ultima Media said integrating those brands, supply chains and different engineering approaches has made Volkswagen extremely complex to manage.

“

That strategy has partly succeeded, but the complexity of integrating all those brands, supply chains and different engineering approaches makes Volkswagen very complex to manage.