Volkswagen’s €1bn Gamble: Breaking a Job Guarantee to Pursue Factory Closures
Published on 07/09/2026 at 03:14 | Redaktion boerse-global.de
The Volkswagen drama is escalating in both the boardroom and on the trading floor. While the supervisory board prepares to vote on what is being described as the toughest cost-cutting package in the company’s recent history, investors have already delivered their verdict: the stock has lost more than 31% since January, trading at €72.94 – perilously close to its one-year low. The relative strength index, at 33.0, points to a deeply oversold condition that rarely fails to grab the attention of value hunters.
Behind the market jitters lies a series of decisions that could reshape Europe’s largest automaker. Management, led by CEO Oliver Blume, is proposing to eliminate over 100,000 positions by 2035, a target that would make the current headcount reduction plan the most aggressive in the group’s history. Four German facilities – Hannover, Emden, Zwickau and the Audi plant in Neckarsulm – face potential closure as part of the capacity squeeze. Volkswagen currently has plants capable of producing roughly 12 million vehicles annually, yet sales have slipped to about 9 million, leaving a utilisation gap that the board can no longer ignore.
But the path to downsizing is strewn with obstacles. A job guarantee negotiated with IG Metall at the end of 2024 protects all German sites until 2030. Breaking that pact would trigger a contractual penalty of €1bn – a sum that now hangs like a sword over the board’s deliberations. Workers are already mobilising for nationwide protests on the day of the meeting, as union representatives and the state of Lower Saxony, a major shareholder, oppose any plant closures. Lower Saxony’s deputy premier, Julia Willie Hamburg, has urged management to find synergies instead, arguing that shutdowns would not alleviate the current crisis until well into the next decade.
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The tension has prompted Blume to explore an even more radical structural overhaul. Under one scenario being considered, the core Volkswagen brand and the components division would be spun off into separate legal entities, leaving the parent company as a pure holding. This restructuring would effectively sideline the controversial Volkswagen Law, which grants the state of Lower Saxony a blocking minority of 20%. By relocating decision-making to a holding structure, management could push through cuts without state interference – a move that would be unprecedented in German industrial history if it required a vote of all shareholders at an extraordinary general meeting.
Analysts at UBS have added to the pressure by predicting a substantial profit warning. The bank expects Volkswagen to book provisions for the restructuring programme in the mid-to-high single-digit billions. The exact amount will likely be clarified once the board has formally reviewed management’s proposals. Until then, the risk of a formal earnings downgrade remains fully priced into the stock.
The mood in the industry is unsparing. Hildegard Müller, president of the VDA automotive industry association, has called for deep structural reforms, criticising Germany’s high labour costs as a competitive disadvantage. Meanwhile, the factory workers who stand to lose their jobs are preparing for a prolonged battle. Whether the board will approve the cuts or force a showdown with shareholders remains the central question of Thursday’s meeting – one that could determine the course of Volkswagen for the next decade.
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