Volkswagen is planning to cut 50,000 jobs worldwide and close four German factories to address high labor costs and competition from Chinese electric vehicle manufacturers.

Volkswagen is preparing to reduce its global workforce by 50,000 positions as it faces pressure from agile Chinese competitors and high operational costs. The company's supervisory board reviewed the proposal on September 2, which also includes plans to close four factories in Germany. These measures follow previous job cuts and aim to address a cost structure that analysts describe as significantly higher than that of industry peers like Toyota.

Strategic Causes of Workforce Bloat

Volkswagen’s large workforce is partly the result of a long-standing strategy to control more stages of production internally, including components and software. Analysts note that this approach, combined with an aggressive acquisition strategy that brought brands like Porsche, Audi, and Skoda into the group, has created complex supply chains and high labor costs. Factory expenses in Germany are reportedly up to twice as high as those of international competitors.

Market Challenges and Structural Hurdles

The company’s transition to electric vehicles has been slower than that of Chinese rivals, contributing to declining sales in China and softening demand in Europe. Additionally, Volkswagen faces internal challenges, including the influence of trade unions and the state of Lower Saxony, which holds 20% of voting rights and has historically resisted plant closures and layoffs. Experts suggest that while the proposed cuts may improve short-term profitability, more radical reforms, including increased automation, may be necessary for long-term survival.