The German automotive giant Volkswagen is planning to significantly reduce its production capacity in response to challenging market conditions.
Oliver Blume, the CEO of the company, stated in an interview with Manager Magazin: “We are currently considering an additional reduction of up to one million units in production capacity to align with the global market situation… This would bring our total production capacity down from over 12 million vehicles to a sustainable level of 9 million vehicles annually,” adding that this will apply across the company’s facilities worldwide.
Volkswagen has already cut its production capacity in China and Europe, particularly at its core personal vehicle brand Volkswagen and its subsidiary Audi, by one million vehicles in each market.
Blume remarked: “Our excess production capacity is not sustainable in the long run for our company… Given the current market conditions and competition, previous production plans are no longer realistic,” noting that no decision regarding plant closures has been made yet.
He further explained: “There are smarter solutions than directly closing a factory. For example, in Osnabrück, we will cease Volkswagen production next year – a decision we made in 2024,” clarifying that the company is in discussions with firms in the defense sector about potentially shifting production there and accommodating employees, though a final agreement has not been reached yet.
Blume emphasized: “We have a clear plan to reduce production capacity in a socially responsible manner,” referring to the current job cuts taking place.
Volkswagen is currently working to eliminate approximately 50,000 jobs in Germany across its core brand and subsidiaries, particularly Audi and Porsche, in an effort to cut costs.
Blume pointed out that the current profit levels are insufficient to fund long-term investments in models and technologies, and he did not rule out further job reductions, stating: “It is our duty to thoroughly examine everything. We are reviewing all cost items, which is an essential part of our responsibility to the company.”
Blume noted that Volkswagen plants were designed in 2019 to produce 12 million vehicles annually, but since the COVID-19 pandemic, production has averaged around 9 million vehicles in a drastically changed market environment.
In the U.S., Volkswagen is contemplating the use of its new factory under construction for the electric brand Scot, but a definitive decision has yet to be made, according to Blume.