Volkswagen Deepens Restructuring as Weak Profits Raise Risk of Plant Closures and Job Cuts

Volkswagen reported a sharp decline in second-quarter profit as Europe’s largest automaker faces mounting pressure from high costs, global trade tensions and stronger competition from Chinese manufacturers.

The company posted operating profit of 3.5 billion euros for the April-to-June period, nearly 10% lower than a year earlier and below analysts’ expectations of 4.3 billion euros. Volkswagen also abandoned its previous forecast for revenue growth in 2026 and now expects annual sales revenue to decline by as much as 3%.

The disappointing results come as Volkswagen prepares to significantly expand its cost-cutting program. The automaker is reportedly considering the elimination of up to 100,000 positions, twice the number previously discussed, as management seeks to stabilize margins and improve productivity across the group.

Chief Executive Oliver Blume recently told employees that Volkswagen’s costs were around 20% higher than those of comparable companies, underscoring the need for further reductions. The company has also been unable to confirm alternative uses for four German plants that were previously considered at risk, including facilities in Hanover, Zwickau, Emden and Audi’s Neckarsulm site.

Volkswagen reached an agreement with labor unions in late 2024 to avoid factory closures in Germany and prevent compulsory redundancies through the end of 2030. However, the latest profit warning has renewed concerns over whether the group can preserve all of its existing production capacity under current market conditions.

Chief Financial Officer Arno Antlitz said the company’s operating margin of roughly 4% represented a clear warning that a second phase of restructuring was necessary. He pointed to rising tariff expenses, the expansion of China’s domestic premium vehicle market and increasing Chinese auto exports to Europe as major pressures on the business.

Antlitz emphasized that Volkswagen was not pursuing factory closures or job cuts as objectives in themselves. Instead, the company is focused on lowering its cost base, increasing productivity and improving capacity utilization across its manufacturing network.

Management is considering several alternatives for underused plants, including potentially making capacity available to other industries. Antlitz said Volkswagen would prefer solutions that preserve production sites if those options can deliver stronger efficiency and improve plant utilization.

The company is also adjusting its global manufacturing footprint. In April, Volkswagen announced that it would stop producing the ID.4 electric sport utility vehicle at its Tennessee facility as demand for electric vehicles in the United States remained challenging.

Blume said Volkswagen had managed to offset unavoidable financial pressures amounting to tens of billions of euros, but warned that conditions across the automotive industry remained exceptionally difficult. Geopolitical tensions, trade disputes, regulatory costs, volatile demand and intensified competition continue to weigh on automakers worldwide.

Volkswagen shares fell around 3% following the results and have declined nearly 30% since the beginning of the year. The market reaction reflects growing investor concern over whether the company can execute its restructuring quickly enough to restore profitability while managing political and labor resistance to factory closures and large-scale job reductions.