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| Economy | |
| 'A Pile of Ruins.' German auto giant closes plants and lays off workers | |
| 2026-07-11 | |
| Direct Translation via Google Translate. Edited by Gregor Spitzen [REGNUM.RU] The German manufacturer of "people's cars," the Volkswagen Group (VW), is going through hard times. Demand for German automakers is falling globally, production costs are rising due to both objective economic factors and ill-considered top management policies, and there remains no light at the end of the tunnel. Therefore, the Volkswagen board of directors, headed by CEO Oliver Blume, intends to solve the issue radically: to shut down production at the Zwickau and Emden plants within five years.
Thus, over the next four years, up to 100,000 jobs at the concern’s plants are at risk. Blume intends to more than triple Volkswagen's low profitability by 2030, bringing it to 9%. This should be facilitated, in particular, by a significant reduction in investment—from €180 billion to €135 billion between 2027 and 2031. These two plans are closely interrelated. Blume expects that models that have been produced in German factories to date will in future be manufactured in cheaper Eastern European plants. Investments will be directed toward plants such as the VW plant in Bratislava or the Audi plant in Győr, Hungary. The German plants are planned to be repurposed, for example, by being sold to defense companies. "This will be the most comprehensive reorientation in the history of the group. The Board of Management is taking on responsibility for the company's sustainable future at a time when the automotive industry worldwide is under intense pressure," Blume assured. Volkswagen is making less and less money on its cars: operating profitability in the first quarter of 2026 was only 3.3%, which is significantly below the target of 8-10%. The main reasons are declining sales in China (once Volkswagen's primary market), competition from local manufacturers (such as BYD), and the auto tariffs imposed by Donald Trump, which cost the company €5 billion annually. Furthermore, VW, which includes brands such as Audi and Porsche, is forced to invest in both electric vehicles and internal combustion engine technologies. At the Supervisory Board meeting on July 9, the VW board of directors failed to secure approval for the cost-cutting resolution they had submitted. The state of Lower Saxony and employee representatives voted against it, resulting in the resolution being rejected by a vote of 7 to 12. This outcome was entirely logical, as the company's board outlined the plan's goals but said virtually nothing about how it intended to achieve them. For example, production capacity at plants in China and Europe would be reduced from 12 million to 9 million vehicles. But how should this happen? The logical economic consequence would be the complete closure of factories or their repurposing. And ideally, where this is especially expensive, that is, in Germany. However, the plan says nothing about this. For example, the vehicle model range is expected to be reduced by 50%, and the number of trim levels by as much as 75%. Which models will be eliminated from the portfolio and when exactly is still unclear. Of course, this will also impact the workload of individual plants. Therefore, it's not surprising that employee representatives were completely dissatisfied with this general statement. So, although VW and its subbrands still employ more than 660,000 people worldwide, a downward trend is already evident. Observers have long criticized the company for low utilisation rates at many production sites and a lack of profitability. However, closing or relocating plants will be difficult given the balance of power on the supervisory board, where employees hold a strong position. The cost-cutting package agreed upon two years ago excludes layoffs for economic reasons and plant closures until the end of 2030. Olaf Lies, the minister-president of Lower Saxony, the state where the group's main production sites are located and which also has its own people on the board, stated in advance that he would not approve of any measures "based on plant closures as a supposedly simple solution." However, the consequences of the crisis extend far beyond Lower Saxony. VW is the core of a vast industrial network. Every job within the group affects the lives of numerous employees at suppliers, logistics companies, and specialized medium-sized enterprises. Large suppliers like Bosch and Continental are already implementing their own extensive cost-cutting programs. For highly specialized medium-sized companies, whose added value often still relies on internal combustion engines, survival is a matter of concern. If this industrial anchor disappears, not only will tax revenues for entire regions decline, but damage will also be done to the social fabric and to trust in Germany as the engine of European industry. In short, VW's collapse could trigger a chain of crises that would undermine the already stagnant German economy. Unfortunately, the German government seems to be unaware of this. And instead of addressing the problems of the German economy's main export sector, they continue, with a persistence worthy of better uses, to squander taxpayers' money on military projects. These projects, like the multi-billion dollar contract for American Tomahawk missiles, will not go to the national defense industry, but will instead go overseas to American military-industrial corporations. On the evening of July 9, Chancellor Friedrich Merz addressed the Bundestag with a government statement regarding the current political and economic situation, attempting to justify the need to increase military spending at the expense of other sectors of the economy. He faced harsh criticism from the opposition, led by Alice Weidel, the leader of the Alternative for Germany party, who lashed out at the chancellor with accusations of economic decline, rising tax burdens, failed migration and energy policies, and the infringement of civil liberties. Weidel stated that the country has plunged into a deep crisis due to deindustrialization, business bankruptcies, and the loss of economic competitiveness. She also noted the growing burden on citizens in the form of ever-increasing taxes and social contributions, as well as the expansion of state powers to intervene in the lives of citizens. Her speech concluded with a direct call to the Federal Chancellor to clear the way for new elections: "You are leaving behind a pile of rubble for those who come after you. I can tell you one thing: we will still accept this challenge and do everything necessary when the voters give us the mandate. Even if you destroy everything." Related: Volkswagen 06/27/2026 VW weighs up to 100,000 job cuts, four plant closures in biggest overhaul yet, sources say Volkswagen 05/05/2026 Two killed after car driven into crowd in German city Leipzig Volkswagen 04/23/2026 Tank makers eye bankrupt German auto plants | |
| Posted by:badanov |
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