Volkswagen Headquarters in Germany [AFP/Yonhap News File Photo]

The German automaker Volkswagen Group, which is pushing for large-scale restructuring despite opposition from labor unions and politicians, has stated that it does not intend to close any factories.

Volkswagen CEO Oliver Blume said in an interview with the daily newspaper Bild on the 12th (local time), "There are smarter solutions than closing factories," adding, "We reduced costs at our German plants by an average of 20% in the last year alone. That is significant progress."

He also suggested his intention to continue pursuing cost-cutting measures, excluding factory closures, by stating, "Our business environment has never been as challenging or risky as it is today."

On the 13th, CEO Blume confirmed that a total workforce reduction of approximately 100,000—including the previously announced target of 50,000—is necessary, and that four plants in Germany are also targets for further restructuring.

According to Der Spiegel and other reports, Blume stated in an internal company memo that day that Volkswagen's indirect costs are 20% higher than those of other automakers, noting that "theoretically, if there are no changes to labor costs, we would need to cut about 50,000 jobs worldwide."

He added that the company is currently identifying to what extent personnel adjustments are necessary and feasible across all subsidiary brands.

He also remarked, "It is a fact that we cannot guarantee enough production volume at the Emden, Hanover, Zwickau, and Neckarsulm plants to maintain competitiveness in the 2030s."

Media reports have suggested that Volkswagen Group plans to cut 100,000 jobs—15% of its 657,000 global workforce—and shut down four additional plants in Germany. This marks a significant expansion from the previous restructuring goal of cutting 50,000 jobs and ceasing vehicle production at two plants. Management had refused to comment on such reports, which have been surfacing since the 26th of last month.

The company stated on the 9th that it had reported to its supervisory board, the management oversight body, a plan to reduce annual production capacity from the current 10 million to 9 million vehicles and to phase out up to 50% of its model lineup.

Volkswagen CEO Oliver Blume [Reuters=Yonhap News File Photo]

Local media reported that employee representatives on the board and the state government of Lower Saxony, the company's second-largest shareholder, voted down the cost-cutting measures proposed by CEO Blume. NDR reported that a labor-management compromise appears unlikely before the next supervisory board meeting in mid-September.

While the union had previously agreed to a cost-cutting plan involving the reduction of 35,000 jobs and halting production at two German plants in 2024, they are opposing this newly expanded restructuring plan. Lower Saxony, governed by a coalition of the center-left Social Democratic Party (SPD) and the Green Party, also maintains that jobs and production facilities must be protected. Lower Saxony Premier Stephan Weil stated, "We will not agree to factory closures as a simple solution."

To avoid closing factories, the company is reportedly exploring options such as transferring plants to defense firms or manufacturing models previously produced only in China at German plants.

However, the sale of factories, which has been under discussion since last year, is facing difficulties. Volkswagen had negotiated the sale of its Osnabrück plant—where production is already slated to stop in 2024—to the German defense contractor Rheinmetall, but the deal fell through.

Another potential buyer mentioned, the Israeli state-owned defense firm Rafael Advanced Defense Systems, is facing opposition from the Qatar Investment Authority (QIA), the group's third-largest shareholder with a 10.4% stake. Although the Qatari government has mediated ceasefires in the Gaza war, it does not have formal diplomatic relations with Israel. The relationship is strained, partly due to the presence of the Palestinian militant group Hamas's political office in Doha.

The daily newspaper Süddeutsche Zeitung (SZ) commented, "The idea of producing weapons instead of convertibles is not as easy as it seems in theory," adding that "it shows how deeply Volkswagen can become entangled in geopolitical upheaval, beyond the fight over restructuring and cost-cutting."