Volkswagen Group's CEO identifies slim profit margins as the core challenge facing the company.
Additional cost-cutting steps are set to apply throughout the entire organization.
Bild reports that up to 120,000 positions may be eliminated, equaling about one-fifth of the total workforce.

Ford CEO Jim Farley previously explained that models such as the Fiesta, Focus, and Mondeo/Fusion were discontinued not due to weak sales. Instead, they ended because the company failed to generate sufficient returns. Elevated manufacturing expenses reduced margins to the point where continuing production became unsustainable.

Looking ahead to 2026, the Volkswagen Group confronts a comparable challenge across its wide range of brands and vehicles. In a discussion with German newspaper Bild, CEO Oliver Blume emphasized that demand is not the issue. Rather, profitability lags: "Our products are very popular but we are not making enough money on them. That is why we need to further reduce our costs across all cost categories."

Popularity varies among the many offerings from the VW Group. The conglomerate has already outlined a strict cost-reduction strategy that could cut its model range in half. As many as 50 percent of the vehicles from the VW core brand, Audi, Skoda, Lamborghini, Porsche, Bentley, SEAT, and Cupra may be discontinued in coming years. The focus will shift to high-volume products and those delivering stronger margins to simplify operations.

Photo by: Volkswagen

Blume told Bild that the group aims to shrink its scope to improve results: "In the future, we want to increase sales per model. To achieve this, we are consistently streamlining our product portfolio." Beyond removing numerous models, the company plans to cut available options on remaining vehicles by as much as 75 percent.

Plant closures received no mention in the recent company statement or in Blume's Bild interview. This comes even though the group has already set a target to lower yearly production capacity to 9 million vehicles, down 1 million from current levels. German business publication Manager Magazin suggests the Zwickau, Emden, Hanover, and Neckarsulm sites face possible shutdowns, though the VW Group has not verified those claims.

Bild indicates job reductions could exceed the previously stated 50,000 positions. The VW Group might cut as many as 120,000 roles, or roughly one-fifth of its worldwide staff. This number stays speculative for now. Still, the company seeks to trim operations to manage high labor and energy expenses by concentrating on its strongest performers.

Among the eight car brands in the VW Group, only Skoda has released a separate response to the cost-cutting plans. A spokesperson for the Czech manufacturer told Reuters there is "no immediate impact on our operations" and that its plants continue at full capacity.

What do you think?

Motor1's Take: Challenges are mounting in Wolfsburg, showing that the previous approach no longer delivers results. Elevated production expenses, excessive model variety, and rising competition have all played roles in the difficulties. The VW Group possesses the resources to recover, yet it must first make major reductions in scale.

The Volkswagen Group of tomorrow will differ markedly from its current form, and conditions may grow more difficult before improvement arrives.

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Sources: Bild, Reuters, Manager Magazin