Europe’s largest automaker, Volkswagen, finds itself embroiled in an unprecedented crisis as it grapples with mounting pressure from workers, politicians, and market forces. The company’s struggle to navigate the electric vehicle transition whilst maintaining its traditional workforce structure has created significant tension within the organisation.
The German automotive behemoth, deeply rooted in the country’s post-war economic success, faces the stark reality of shuttering at least three factories on home soil and implementing substantial workforce reductions. These measures have ignited fierce resistance from the company’s powerful works council, led by Daniela Cavallo, who describes the situation as “existential” for VW’s 296,000 German employees.
The crisis extends beyond corporate boundaries, challenging the foundations of Germany’s economic model. VW’s flagship brand operates with production costs twice that of competitors, while its market share in China has plummeted from 20% to 14.5% over five years. The company’s profits from Chinese joint ventures have halved to €2.6bn in 2023, with further decline expected.
Oliver Blume, who succeeded Herbert Diess as CEO in 2022, faces the monumental task of restructuring while navigating VW’s complex governance structure. The Porsche-Piëch family holds 53% of voting rights, while the state of Lower Saxony maintains a crucial 20% stake, often aligning with worker representatives to resist dramatic changes.
The transition to electric vehicles has proved particularly challenging. The ID.3, intended as the electric successor to the iconic Golf, received poor reviews for its high price point, limited range, and software issues. The situation worsened when Germany abruptly ended EV subsidies, leading to a 29% drop in electric vehicle sales.
Despite these challenges, VW maintains significant financial strength with €34.4bn in net cash and €3.3bn in cash flow for the first nine months of 2023. The company’s vast R&D budget and strong brand portfolio suggest potential for recovery, provided it can overcome its internal resistance to change and adapt to the evolving automotive landscape.
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