Volkswagen logo (left), State of Lower Saxony coat of arms [AFP=Yonhap News File Photo]

German automaker Volkswagen Group is pushing ahead with the largest restructuring in the industry's history. However, it remains unclear whether the management's plan will proceed as intended, as the labor sector is fiercely opposing the cost-cutting measures, which include mass layoffs and factory closures.

On the 9th (local time), the Volkswagen Group supervisory board began discussions on the cost-cutting proposals presented by CEO Oliver Blume.

According to the business media outlet Manager Magazin and the weekly magazine Der Spiegel, CEO Blume has drawn up a plan to cut 100,000 jobs—representing 15% of the 657,000 global workforce—and close four additional factories in Germany. The daily newspaper Bild reported on the same day that the layoff target is actually 120,000, not 100,000 as previously known. The company has remained silent regarding the specific details of the restructuring plan.

Management had previously reached an agreement with the labor union in 2024 to reduce 35,000 jobs in Germany and cease production at two German plants. Later, the layoff target was increased to 50,000. The new plan, which doubles that figure again, represents the largest in the history of the automotive industry, exceeding the 74,000 job cuts by General Motors (GM) in the United States in 1991.

It is reported that management plans to phase out production by 2034 at the Zwickau, Emden, and Hanover plants, as well as the Audi factory in Neckarsulm. These four facilities employ approximately 40,000 people. The company reportedly intends to sell the facilities to defense contractors and utilize plants in Eastern Europe, where labor costs are lower, for automobile production.

Management is also said to have proposed a reduction in investment from the current 180 billion euros (310 trillion won) annually to 135 billion euros (233 trillion won) by 2031. Der Spiegel reported that the goal of these cost-cutting measures is to boost the operating profit margin, which fell to 3.3% in the first quarter of this year, to 9% by 2030.

Protest against restructuring [AFP=Yonhap News]

The labor union, which had agreed to restructuring two years ago, reacted strongly to the news of the historic scale of the layoffs. IG Metall, the union representing Volkswagen workers, held protest rallies at 12 Volkswagen sites, including the headquarters in Wolfsburg, Lower Saxony, where the board meeting was held. Thorsten Gröger, regional head of IG Metall for Lower Saxony and Saxony-Anhalt, warned management that they would face "unprecedented large-scale industrial action."

Local media outlets predict that there is little chance of the restructuring plan passing the supervisory board without a compromise with the union. It is rare for the Volkswagen supervisory board—composed of 10 shareholder representatives and 10 worker representatives—to make decisions by vote without consensus, and the management side is currently at a disadvantage even if a vote is held due to a vacancy among shareholder representatives. The so-called "Volkswagen Law," enacted at the time of privatization in 1960, mandates that major decisions, such as factory relocation or new construction, must receive approval from two-thirds of the supervisory board.

The state government of Lower Saxony, which holds a 20% stake in the group and possesses veto power, is also opposing the job cuts, recently proposing joint production with Chinese companies as an alternative. It is reported that to circumvent the Volkswagen Law, management has even prepared a plan to separate the core Volkswagen brand into a distinct subsidiary, similar to Porsche.