Fear and compromise: How Volkswagen struck a deal over historic job cuts
04/09/2026 17:58
By Christina Amann and Christoph Steitz
BERLIN/FRANKFURT, Sept 4 (Reuters) - In a tense meeting
on Wednesday afternoon at Volkswagen's VOWG_p.DE headquarters
in Wolfsburg, three of the firm's biggest power players looked
to thrash out an unlikely deal as the embattled carmaker veered
towards full-blown crisis.
CEO Oliver Blume, wanting to push through plans for historic
job cuts that could hit 100,000 workers, was locked in talks
with Supervisory Board Chairman Hans Dieter Poetsch and Olaf
Lies, state premier of the powerful Lower Saxony region, a key
shareholder and the heartland of Volkswagen's local production.
The trio, alongside labour representatives, wanted to avoid
a threatened 'nuclear option' of an EGM, if the supervisory
board opposed the management board, which would have resulted in
lengthy and damaging legal battles.
As a result of what they settled on, the supervisory board
struck an ambitious turnaround agreement that amounts to the
biggest restructuring in the group's 89-year history and averts
a clash between major stakeholders.
Volkswagen, Europe's largest carmaker with over 650,000
workers, is battling dwindling margins as it is squeezed by
China rivals and tariffs from U.S. President Donald Trump. It
needs to cut costs and become more efficient to survive.
With Lower Saxony and unions strongly opposed to job cuts -
and the threatened closure of four German plants - a deal looked
a distant prospect. Investors feared Volkswagen was "unfixable"
and was headed towards a dangerous and costly standoff.
'THE DAMAGE WOULD HAVE BEEN UNIMAGINABLE'
Four sources with knowledge of Wednesday's talks said
Volkswagen's management board had a day earlier unified around a
tough line that it was serious about calling an emergency
shareholder meeting that could bypass the supervisory board to
approve jobs cuts - and carve out some divisions that would
weaken other power factions.
The management board made it clear that it would resort to
the extreme measure of an EGM if the supervisory board - where
unions and Lower Saxony have a majority - opposed its plans, the
sources said.
This threat to use what the sources called a "nuclear
option" paved the way for a compromise on Wednesday, with the
growing sense that the outcome of failing to reach a deal could
be even worse than the mooted job cuts, with legal battles
dragging on for years, hurting Volkswagen even more.
"The damage would have been unimaginable if there hadn't
been a solution," one of the four people said.
That, along with a first meeting of top stakeholders on
Tuesday in Hanover, set the ground for Wednesday. Blume, Lies
and Poetsch, Volkswagen's former finance chief and the CEO of
its largest shareholder Porsche SE PSHG_p.DE , began to draw up
the contours of an agreement, knowing they had to move fast.
They were joined by Daniela Cavallo, the powerful head of
Volkswagen's works council, and Christiane Benner, head of
Germany's biggest union IG Metall and the group's deputy chair,
one of the people said.
The deal would see the automaker get approval for job cuts
while essentially postponing plans to create separate legal
entities for the group's passenger car and component divisions,
the sources said.
Lower Saxony, which would have seen its power diminished
under this scenario, agreed to this, the sources said, adding
labour representatives were then brought into the talks to reach
a common line on the turnaround plan.
UNIONS PROMISED TO FIGHT JOB CUTS WITH 'ALL OUR MIGHT'
That was no easy feat. Just days before IG Metall -
Germany's most powerful union representing the German
automaker's workers - had promised to fight any job cuts with
"all our might". Lower Saxony, Volkswagen's second-largest
shareholder, had also opposed the restructuring plan to shed
50,000 jobs. CEO Blume had lost a similar vote in July.
By Thursday morning a compromise had been struck, the people
said, and the firm brought forward its planned supervisory board
meeting by a day, catching investors out with a unanimous vote
in favour of the turnaround deal, the sources said. The shares -
at a quarter of their value five years ago - rallied.
Spokespeople for Volkswagen's supervisory board, its works
council and Lower Saxony all declined to comment.
Blume has long argued there is no alternative to cuts in
order to turn around the world's second-largest automaker, which
like rivals such as Stellantis STLAM.MI has far too much
production capacity in Europe.
Globally, legacy automakers like France's Renault RENA.PA
have already restructured, while others like Japan's Nissan
7201.T are in the midst of a painful restructuring that has
involved selling factories and postponing future models.
Solutions for Volkswagen's four factories in Emden, Zwickau,
Neckarsulm and Hanover - still unclear - could involve pivoting
to new sectors or sales to ensure they can keep operating once
production is phased out in the next decade.
The vote, however, is no silver bullet. The board-approved
cuts will still need to be negotiated with unions, which could
mean strikes at Volkswagen plants across Germany down the line.
Challenges from China to tariffs haven't gone away.
"The uncertainty will remain," one of the sources said. "And
it will only disappear once (Volkswagen's) executive board
quickly presents concrete plans."
(Writing by Nick Carey; Editing by Alexandra Hudson)
((mailto:nick.carey@thomsonreuters.com; +44 7385 414 954))