Volkswagen’s top decision-makers reached a compromise this week to prevent an escalating dispute over sweeping job cuts from turning into a prolonged corporate battle.
At a tense meeting Wednesday afternoon at the automaker’s headquarters in Wolfsburg, CEO Oliver Blume held talks with Supervisory Board Chairman Hans Dieter Poetsch and Olaf Lies, premier of Lower Saxony, a key Volkswagen shareholder and the center of the company’s domestic production operations.
The three, together with labour representatives, were seeking to avoid a threatened “nuclear option”: an extraordinary general meeting, or EGM, that could have been triggered if the supervisory board rejected the management board’s plans. Such a confrontation could have led to lengthy and damaging legal disputes.
The agreement ultimately approved by Volkswagen’s supervisory board represents the largest restructuring in the group’s 89-year history and prevents a direct confrontation between its major stakeholders.
Europe’s largest automaker, which employs more than 650,000 people, is struggling with declining margins as competition from Chinese manufacturers and tariffs imposed by U.S. President Donald Trump put additional pressure on the business. The company needs to reduce costs and improve efficiency to remain viable.
Reaching an agreement had appeared difficult, with Lower Saxony and labor unions strongly resisting job reductions and proposals to close four German plants. Investors had feared Volkswagen was “unfixable” and heading toward an expensive and damaging confrontation.
‘THE DAMAGE WOULD HAVE BEEN UNIMAGINABLE’
Four people familiar with Wednesday’s negotiations said Volkswagen’s management board had agreed a day earlier to take a firm position, including pursuing an emergency shareholder meeting if necessary. Such a meeting could potentially have bypassed the supervisory board to secure approval for job reductions and separate certain divisions, weakening other influential groups within the company.
The management board made clear it was prepared to take the extreme step of calling an EGM if the supervisory board rejected its proposals, the sources said. Unions and Lower Saxony hold a majority on the supervisory board.
The threat, described by the sources as a “nuclear option,” helped create the conditions for a compromise on Wednesday. There was increasing recognition that failing to reach an agreement could produce consequences even more damaging than the proposed job cuts, with legal disputes potentially lasting years.
“The damage would have been unimaginable if there hadn’t been a solution,” one of the four people said.
A meeting between major stakeholders on Tuesday in Hanover also helped prepare the ground for the negotiations. Blume, Lies and Poetsch, Volkswagen’s former finance chief and CEO of its largest shareholder Porsche SE, began outlining a deal, aware that a rapid resolution was needed.
They were joined by Daniela Cavallo, head of Volkswagen’s works council, and Christiane Benner, head of Germany’s largest union, IG Metall, and the group’s deputy chair, one person said.
Under the agreement, Volkswagen would receive approval to proceed with job reductions while effectively delaying plans to establish separate legal entities for its passenger car and components divisions, according to the sources.
Lower Saxony would have lost influence under the original scenario but agreed to the revised approach, the sources said. Labour representatives were subsequently brought into the discussions to establish a common position on the restructuring.
UNIONS PROMISED TO FIGHT JOB CUTS WITH ‘ALL OUR MIGHT’
Securing that agreement was difficult. Only days earlier, IG Metall, Germany’s most powerful union representing Volkswagen workers, had pledged to oppose any job cuts with “all our might.” Lower Saxony, Volkswagen’s second-largest shareholder, had also rejected the restructuring proposal involving 50,000 job reductions. Blume had suffered a similar defeat in July.
The sources said a compromise was reached by Thursday morning. Volkswagen then moved its scheduled supervisory board meeting forward by a day, surprising investors with a unanimous vote backing the turnaround agreement. The company’s shares, which were worth a quarter of their value five years ago, rose.
Representatives of Volkswagen’s supervisory board, works council and Lower Saxony declined to comment.
Blume has repeatedly said job reductions are unavoidable if Volkswagen is to complete its turnaround. Like competitors including Stellantis, the world’s second-largest automaker has more production capacity in Europe than it needs.
Other established automakers have already undertaken major restructuring. France’s Renault has reorganized its business, while Japan’s Nissan is undergoing a difficult restructuring that has included factory sales and delays to future models.
The future of Volkswagen’s four plants in Emden, Zwickau, Neckarsulm and Hanover remains unresolved. Possible solutions could include shifting the facilities into other industries or finding buyers so they can continue operating after vehicle production is phased out during the next decade.
The supervisory board’s decision is not a complete solution, however. The approved job reductions still have to be negotiated with unions, potentially leading to strikes at Volkswagen facilities across Germany. Meanwhile, the challenges posed by Chinese competition and tariffs remain.
“The uncertainty will remain,” one source said. “And it will only disappear once (Volkswagen’s) executive board quickly presents concrete plans.”
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