Volkswagen plans to cut 100,000 jobs and close factories

Volkswagen, Europe’s largest car manufacturer, is considering the biggest restructuring in its history, including doubling the planned job cuts to 100,000 and closing four German plants. This is according to Reuters, citing sources.

The agency notes that this plan by Volkswagen’s CEO, Oliver Blume, may be an attempt to overcome long-standing resistance within the corporate structure.

The company is also considering plans to spin off its passenger car and components divisions into separate units, which could test the limits of the Volkswagen Act, which enshrines the influence of trade unions and the state of Lower Saxony – the second-largest shareholder.

The law effectively restricts management’s ability to close plants. However, as it applies to VW AG, which controls the group’s six main German plants, the creation of separate entities could pave the way for circumventing these restrictions.

Three sources have stated that spinning off the passenger car division could be a step in this process.

However, such moves are likely to lead to a confrontation with influential trade unions and political parties. Nevertheless, given the crisis in the sector, Volkswagen’s share price hovering near a 16-year low and mounting internal tensions, some investors say that management has no choice but to challenge the current situation.

At the same time, any spin-off under the Volkswagen Act will still require the approval of 80 per cent of shareholders, which would effectively give Lower Saxony (20 per cent of the votes) a blocking stake.

Volkswagen is currently grappling with rising labour costs, increasing expenses and intensifying competition from Asia.

It is worth recalling that, at the end of last year, Volkswagen halted car production at its Dresden site, marking the first time in the company’s 88-year history that it had shut down operations in Germany.