Volkswagen is forging ahead with one of the largest restructurings in modern automotive history.
Over the next few years, Volkswagen Group is going to look dramatically different than the automaker we know today. The company’s board of directors approved its ‘Future Plan 2030’, first announced last month, to dramatically cut its portfolio, streamline available options, close some manufacturing capacity and eliminate 50,000 workers and managers over the next 3-4 years.
Broadly, the plan includes a dozen initiatives aimed at boosting profits, curbing manufacturing costs and focusing on its “iconic brands”, while also paring back or jettisoning less prominent brands altogether. Headline figures include that 50K employee cut, as well as a 50% reduction to vehicle models and up to 75% fewer option choices within the model lines left standing.
“The Supervisory Board has unanimously approved the Executive Board’s Future Plan presented today,” said CEO Oliver Blume. “This is a strong signal for the future of Volkswagen Group. We are taking responsibility for our entire workforce, our partners and for industrial jobs worldwide. Over the coming years, we will invest a three-figure billion sum to make our iconic brands even more attractive, stronger and more competitive.”
Two key markets appear to be at the core of VW’s push: North America and the “Global South” (Latin America, Africa, Asia and Oceania). Blume says VW Group will focus on pushing the “most profitable segments” (read, SUVs) to North America, while its Chinese operations will expand its export business for that region.
Europe, on the other hand, is where the company seems to be cutting hardest. Volkswagen’s higher-ups say that European manufacturing capacity outstrips demand by more than 500,000 units. To that end, current production at Emden, Hanover, Neckarsulm and Zwickau could wind down over the next several years, with models like the ID.3, ID.4, ID.Buzz and Audi A5 no longer rolling out of those facilities (and likely scrapped altogether).
Under the plan, brands like Audi and Lamborghini could have their available options for things like seats, steering wheels and colors massively cut back as part of VW Group’s efforts to streamline production. The automaker stresses it will still remain a player on the global market, however, and its bigger brands like Volkswagen itself, Audi, Porsche, Bentley, Lamborghini and Porsche are still going to be around. Some brands like SEAT over in Europe, however, may see the ax as the automaker keeps the Spanish brand’s performance spinoff, Cupra, around.
One other number Volkswagen put out with approving this plan is its plan to produce 9 million cars by 2030, with an operating margin of 9%. Now, 9 million vehicles sounds like a huge amount — and it is — until you see that VW Group built nearly 11 million vehicles in 2019. Even in 2020, at the onset of the COVID-19 pandemic, it produced 9 million vehicles.
In itself, that production goal is a clear sign of the company’s troubles, and outlines the need for some major action to avert further catastrophe. Will it actually work? VW Group still has its work cut out to enact its approved plans while juggling labor unions, local government and other shareholders, but this is the clearest picture yet for where it’s going over the coming years.
