VW Chief Highlights Challenges, Calls for ‘New German Master Plan’VW Chief Highlights Challenges, Calls for ‘New German Master Plan’

Volkswagen Group CEO Oliver Blume outlines the significant challenges confronting the company in an internal interview leaked to German media.

The interview, shared with Business Insider Germany, comes in the wake of a critical wage settlement with the company’s workers’ union. In it, Blume provides insight into the pressing issues faced by Volkswagen in China, the U.S., and other global markets, while presenting his vision for the automaker’s future.

Although VW’s namesake brand recently achieved financial stabilization by finalizing a cost-cutting program for its German operations, Blume emphasizes this marks “just the beginning” of a protracted restructuring journey for the group and its portfolio of brands, including Audi, Bentley, Cupra, Lamborghini, Porsche, SEAT, Skoda and Volkswagen Commercial Vehicles.

Blume’s earlier description of the VW brand as a “restructuring case” underscores the severity of the situation. His remarks have added verbal weight as the company embarks on its €1.5 billion ($1.54 billion) per year savings plan, addressing production overcapacity, high labor costs and an excess of employees in its home market.

The VW brand’s wage settlement and restructuring measures were communicated prior to the announcement of its 2024 sales, which declined 1.4% to 4.8 million vehicles.

While overall sales were better than anticipated by automotive industry analysts, headwinds and a lack of progress in VW’s efforts to build its electric-vehicle lineup remain; the company’s BEV sales fell 10,900 units short of those achieved in 2023 during the past year at 383,100, according to preliminary figures. 

Job Cuts and Restructuring Concerns

VW has faced controversy over its restructuring strategy. As many as 35,000 positions are planned to be pared from its German workforce by 2030 as part of the ongoing restructuring process, fueling anxiety among employees. Included is a plan to relocate primary production of the Golf from its main Wolfsburg manufacturing headquarters, its home for over half a century, to the company’s lower-cost Puebla, Mexico, plant from 2027. While management emphasizes that such dramatic measures are necessary to secure VW’s long-term future, critics point to inconsistencies in leadership practices.

VW restructuring would see Golf production shifted from Germany to Mexico.

Adding to the controversy is scrutiny of Blume’s own compensation. According to VW’s own financial report, he received an annual salary of €10.3 million ($10.6 million) in 2023, which has led to widespread criticism, particularly in light of recent cost-cutting measures affecting the workforce. A recent headline in Germany’s largest daily newspaper, Bild, suggested Blume earns more in two days – €56,438 (about $57,927) – than the majority of VW employees earn in a year.

The controversial Bild story preceded comments from the Volkswagen Group’s board member responsible for human resources, Gunnar Kilian, suggesting the company is planning to introduce management pay cuts of up to €300 million (about $308.9 million) by 2030.

Challenges in Global Markets

China, the VW brand’s largest market by volume, saw sales decline 8.3% in 2024 at 2,198,900 vehicles, leading to the closure of two production facilities operated in partnership with SAIC. While the North American market recorded an 18.4% increase in VW-brand sales year-on-year at 592,300 units, Blume argues, “there is still much work to do for a competitive product portfolio” on a Group level.

He aims to address these challenges with significant investments, such as the upcoming introduction of the Cupra brand in the U.S., backed by localized production.

Cupra, spun off from VW-owned Spanish brand SEAT, coming to U.S.

Audi, Porsche and Strategic Missteps

Audi, which announced an 11.8% dip in sales in 2024 at 1,671,218 vehicles, remains under significant pressure after reporting a 91% decline in profits. Blume is critical of the brand’s decision to abandon hybrid technology in favor of a full transition to EVs by 2026, calling it a “strategic misstep” that has put it behind competitors.

Similar decisions at Porsche, where sales dropped 3.0% in 2024 at 310,718 vehicles, have also sparked debate. Models such as the Macan and 718 Boxster are transitioning from internal-combustion engines to electric powertrains, although that strategy is being re-examined. However, sales of the electric-powered Taycan plunged 48.7% last year at 20,836 units, leaving analysts to question Porsche’s strategy of replacing successful ICE models with all-electric successors. Although not directly addressed in Blume’s interview, these moves highlight the challenges of balancing innovation with market demands.

Criticism of Germany’s Business Environment

Blume also calls out Germany’s increasingly uncompetitive business environment, citing high taxes, rising energy costs and excessive bureaucracy as significant obstacles. He emphasizes the need for a “new German master plan,” calling for targeted investments in research, sustainable energy, workforce training and digital infrastructure. 

Ahead of Germany’s federal election in February, Blume’s call for reform carries particular resonance. “We must move from the shoulder back to the fast lane,” he says, urging policymakers to prioritize economic growth.

Volkswagen’s Vision for the Future 

Despite the challenges, Blume maintains optimism about VW’s future. “Our goal is to become the leading technological company in the automotive industry,” he says.

Central to this ambition is a recently announced €5.4 billion ($5.8 billion) investment in U.S.-based EV manufacturer Rivian, intended to strengthen VW’s software capabilities and accelerate its transition to electrification.

However, questions remain about how the group will navigate its restructuring while balancing employee concerns, market demands and the need for technological innovation.