VW's Wage Overhaul and 50,000 Job Cuts Signal a Hard Road Back to Profitability
Published on 08/05/2026 at 12:31 | Redaktion boerse-global.de
Volkswagen is betting that a fundamental rewrite of its pay structure can help bridge the gap between a deteriorating profit picture and the political realities of shutting down German factories. The automaker unveiled a new remuneration system on Tuesday, set to take effect on January 1, 2027, that dissolves the long-standing pay divisions between production, administration, and development staff. The goal is a more flexible workforce at a lower cost — a structural fix that could soften the need for outright plant closures.
The timing was telling. The same day, the company disclosed that first-half operating profit fell 11.6 percent to €5.9 billion, with the operating margin slipping to 3.8 percent (4.3 percent on an adjusted basis). Net income for the second quarter dropped 32.9 percent to €1.54 billion, down from €2.29 billion a year earlier. Global deliveries declined 8.6 percent to 2.08 million vehicles in the first six months.
The China Problem Won't Wait
The steepest drag on results remains China, where deliveries collapsed by 31.6 percent in the first half. That erosion has forced CEO Oliver Blume to accelerate a restructuring plan that now envisions up to 50,000 job cuts worldwide by 2030 — 35,000 of them at the core VW brand — and the potential closure of as many as four German plants. The company has already walked back its full-year revenue guidance, now projecting sales to decline by up to 3 percent or at best stagnate, a sharp reversal from the earlier forecast of up to 3 percent growth. The operating return target of 4.0 to 5.5 percent remains in place.
The China strategy leans heavily on a deepening partnership with Xpeng. Volkswagen is rolling out the Chinese partner's "China Electronic Architecture" (CEA) to shorten software development cycles and reduce reliance on its in-house Cariad unit. The first model built on the new architecture, the ID. Aura T6 — an electric SUV developed jointly with Xpeng and FAW — launched in China on Monday. The ID. UNYX 09 fastback, another Xpeng collaboration, has received regulatory approval from China's MIIT and is slated to go on sale in the second half of 2026.
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Works Councils Push Back
The restructuring is meeting resistance at home. In early July, the supervisory board rejected an initial cost-cutting package from Blume by a vote of 12 to 7, with worker representatives and the state of Lower Saxony — which controls 20 percent of voting rights — demanding stronger employment protections. The new pay system can be read as an attempt to achieve savings through structural reform rather than confrontational plant closures.
The pressure is visible across the group. At Porsche, job guarantees have been extended to 2035, but roughly 5,000 positions are still slated for elimination. Audi employees in Neckarsulm have protested against possible closure scenarios. At the OsnabrĂĽck plant, the summer shutdown is being extended by a week in August, followed by a four-day week. Hundreds of management positions in office functions are being cut to counter margin pressure from Chinese competitors.
A Stock Caught Between Two Signals
Investors have yet to be convinced. The preference shares closed Tuesday at €76.92, essentially flat on the day, and remain 26.14 percent below their level at the start of the year. The stock trades 29.50 percent beneath its 52-week high of €109.10 from December, with a market capitalization of roughly €35.9 billion. On Wednesday, the shares inched up 0.42 percent to €77.24, but remain 16.26 percent below their 200-day moving average — a sign the medium-term downtrend has not been broken.
Analyst sentiment is split. UBS's Patrick Hummel reaffirmed a "Neutral" rating on July 27. The consensus twelve-month price target stands between €106 and €112, with an overall "Moderate Buy" rating. An automated price-target model issued €115.67 at the end of July while simultaneously flagging a "Strong Sell" technical signal — a contradiction that captures the broader investor unease.
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What Comes Next
The coming weeks offer several opportunities for management to rebuild credibility. A roadshow will visit Stockholm, Helsinki, and Copenhagen from August 23 to 26, followed by appearances at Commerzbank and ODDO BHF conferences in Frankfurt on September 1. The next major checkpoint is the third-quarter report, scheduled for October 29.
Whether the "Target Image 2030" package — twelve initiatives covering variant reduction, production capacity adjustments, and portfolio streamlining — can be finalized by year-end remains an open question. The unresolved status of four German sites (Emden, Zwickau, Hanover, and Audi's Neckarsulm plant) suggests the hardest negotiations are still ahead. For now, the market is waiting to see whether the wage reform delivers the cost relief the company needs before the political battle over plant closures truly begins.
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