Volkswagen Plans To Shutter Four Factories

Volkswagen Group is in turmoil, due largely to increased sales of Chinese-made cars in European markets. The company has uttered dark warnings about closing factories in Europe for several years. CFO Arno Antlitz said at a conference hosted by Goldman Sachs in London on December 5, 2024, that Volkswagen Group needed to take “decisive action” at its German factories to return them to full operating capacity.

“Our aim is for our factories to be humming with activity,” he said. “The alternative is highly detrimental. Each underutilized factory gradually bleeds out, becoming inefficient and continuously losing competitiveness.” Over the past two decades, some Volkswagen factories in Europe have been operating at less than 60 percent of capacity, with an estimated unused capacity of as much as 800,000 units.

Meeting The Challenge From China

By now it is common knowledge that it is far cheaper to manufacture automobiles in Asia — and particularly China — than it is in Europe. Virtually every factory in China is relatively new while many in Europe have been cranking out automobiles for generations. Over time, European labor unions have been quite successful at raising the standard of living for its members by negotiating increases in wages and benefits.

Between having more inefficient factories and paying production workers more, companies like Volkswagen are finding it harder to make a buck. In 2024, its per vehicle profit was $5,919 on gross profits of $53.5 billion — up strongly from 2016 when it had a gross profit of $37 billion at an average of $3,593 per vehicle. While the company appears to be doing more than okay on paper, much of the increase in profit has come from manufacturing outside of Germany.

In 2024, the company said it wanted to close several factories in German. That suggestion was met with stern resistance from IG Metall, the union that represents most of Volkswagen’s production workers. Ultimately, the two sides agreed to shutter three German factories and reduce the workforce in Germany by 30,000 — mostly through attrition.

Group Target Picture

But now, Manager Magazin — one of the most authoritative industry journals in Germany — claims it has information from company insiders that CEO Oliver Blume has floated an idea to close four factories and eliminate 100,000 workers both in Germany and around the world by 2030. It says the plan will be made public at a company board meeting on July 9. The factories affected are said to be those in Hanover, Zwickau, and Emden, as well as the Audi factory in Neckarsulm.

If implemented, the plan — known internally as the Group Target Picture — would effectively transform Volkswagen AG into a new company, according to Manager Magazin. The report claims the restructuring would eliminate around one-seventh of the group’s global workforce, open the company further to capital markets, and significantly reduce employee influence. IG Metall is bound to have something to say about that last point.

Manager Magazin reports the board is prepared to phase out all four sites over the next few years while continuing the manufacture of current models. According to insiders, production would then end, with successor models either cancelled or transferred to lower-cost manufacturing locations.

Those four plants employ about 40,000 people and have a combined annual production capacity of approximately 750,000 vehicles. Production at those factories is not expected to end until after 2030, unless CEO Oliver Blume decides to discontinue the affected models earlier, something that is not in the current plan.

EV Factories Affected

The Zwickau and Emden factories are dedicated to producing battery electric vehicles. Zwickau builds the ID.3, ID.4, and ID.5, as well as the Cupra Born and the Audi Q4 e-tron. Emden manufactures the ID.4, ID.7, and ID.7 Tourer. Volkswagen has already reduced production capacity at both plants from two assembly lines to one, each operating with two shifts, in response to overcapacity.

The Hanover plant serves as the headquarters of Volkswagen Commercial Vehicles and manufactures the all-electric ID. Buzz and ID. Buzz Cargo, alongside the T-series models. The factory also operates a battery assembly line. The Audi plant in Neckarsulm primarily builds combustion engine and hybrid models, while the nearby Böllinger Höfe facility produces the all-electric Audi e-tron GT. Audi previously closed its Brussels plant in February 2025.

According to Manager Magazin, the proposed restructuring includes not just job cuts and plant closures, it also foresees a fundamental restructuring of the Volkswagen Group organizational plan. That may include not only spinning off the core Volkswagen passenger car brand but the group’s Components division as well. According to the report, those moves would make the businesses easier to list on the capital market. Details of the plan may be forthcoming on July 9.

Labor Is Displeased

Labor, naturally, is not happy about these new developments. Two years ago, it agreed to job cuts of 30,000, a figure that was later increased to 50,000. Now it is double that or more. In a joint statement, IG Metall chair Christiane Benner, Volkswagen Group Works Council chair Daniela Cavallo, and IG Metall district manager Thorsten Gröger said: “The latest media reports are understandably causing uncertainty among our workforce and in the regions where our sites are located. But attacks on the Volkswagen Act, co-determination, and our sites are irresponsible threats. Should such plans be pursued, we will oppose them with all the means at our disposal. Instead of engaging in blind activism, the Management Board should finally do its job and focus on its core responsibilities — competitive products, technologies, Group structures, and synergies, and therefore secure employment.”

While preparing to fire all those people, Volkswagen has shoveled more than $6 billion to Rivian to help it finally get its software house in order. Rivian is a pioneer of zonal architecture. Its founder and CEO RJ Scaringe told The Guardian this week that conventional cars were stuck with a design that scatters computer chips throughout the car — from the engine to the seats and wing mirrors — rather than a centralized architecture that can be easily modified. Relying on a single computer — that’s the zonal approach — reduces production costs by “thousands of dollars” per vehicle, he said. (This is what Tesla has been doing since it introduced the Model S in 2012.)

Gamechanger

Earlier this year, Automobilwoche reported that Volkswagen has begun implementing new production techniques — code named Gamechanger — at its main factory in Wolfsburg. While details are sketchy, it appears that Gamechanger involves high pressure castings and an “unboxed” assembly process. Traditionally, the entire structure of the car is completed and then things like dashboards, seats, and controls are slipped in through door or windshield openings to complete the process. In the “unboxed” method, the front and rear castings are first fitted with all the interior bits and then melded together, using the battery box as the structural link between the two. We expect to hear more about this in the near future. Again, this may remind you of what a certain American car company started doing recently.

The only constant in life is change, and what is happening at Volkswagen today is proof. The corporation will likely survive the turmoil, but the people who lose their employment may not. If the Zwickau factory closes, that will deal a serious economic blow to Leipzig and the surrounding area, which for a long time was part of East Germany.

Economics are important, of course, but looking out for the people who make the finished products is important too. There will be a lot of social pain that goes along with Volkswagen’s restructuring as it tries to meet the challenge of  manufacturing in a changed world.