Volkswagen Announces Sweeping Restructuring PlanVolkswagen Announces Sweeping Restructuring Plan

Volkswagen finalizes an agreement with its works council on a comprehensive restructuring plan designed to streamline operations, enhance efficiency and secure a competitive financial footing as it pivots to electric vehicles. The German automaker confirms the agreement Friday, Dec. 20, stating it targets up to €4 billion ($4.17 billion) in cost savings.

Central to the plan is a workforce reduction program that will see up to 35,000 jobs cut from the German automaker's payroll by 2030.

Most of the reductions will be implemented through voluntary measures, including early retirement and severance packages, in an effort to minimize social disruption, VW says.

The restructuring will also prioritize optimizing production efficiency and reallocating resources toward VW’s electric vehicle strategy in a move aimed at reducing the overall capacity in its German manufacturing network by 700,000 vehicles annually.

Volkswagen confirms the historic former Karmann factory in Osnabrück, which dates back to 1901 and was acquired by Volkswagen in 2009, and the Transparent Factory in Dresden, originally opened in 2002 to produce the now-discontinued Phaeton, will remain in operation, but they are planned to be repurposed in a bid to slash costs.

WardsAuto understands Osnabruck will remain open until 2026 to fulfill a contract to produce the existing T-Roc Cabriolet. It is claimed there are plans for a defense company to step in and preserve as many jobs at the plant as possible.

The Dresden site has been earmarked to cease vehicle production. In the future, it is expected to house a yet-to-be-confirmed VW-run technical operation.

The announcement of the restructuring follows weeks of intense negotiations between VW management and worker representatives. The talks were prompted by Volkswagen Group CEO Oliver Blume’s earlier calls for dramatic measures to cut labor costs, citing Germany's high wages as a barrier to competing with key rivals. Blume had controversially proposed a 20% wage reduction and warned that factory closures were essential for VW's long-term competitiveness.

The potential closure of the Osnabrück and Dresden facilities has drawn sharp criticism in Germany, sparking debates in the German parliament. While VW management had also pushed for the closure of a third plant, both its Zwickau and Emden facilities have been spared in the cost-cutting measures.

VW’s restructuring underscores the delicate balancing act it faces: maintaining production of traditional best-sellers like the Golf, Tiguan and Passat, while ramping up output of newer electric offerings, including the ID.3, ID.4 and ID.7.

The agreement represents a crucial step toward securing greater profit margins amid growing competition from Chinese automakers such as BYD, Chery and Geely.VW's supervisory board approved the agreement in a special session on Friday, Dec. 20, signaling strong support for the restructuring. Meanwhile, the works council, a powerful force in VW’s corporate governance, succeeded in securing measures to cushion the impact on affected workers, including a job security clause through to 2030, but agreed to waive wage increases until 2030.