How Volkswagen's huge workforce became a costly burden
Deutsche Welle · LC · trust 50/100
The struggling German carmaker plans to cut up to 100,000 jobs from its 630,000-strong workforce. How did VW's headcount get so bloated, and will the cuts be enough to survive the Chinese EV onslaught?
https://p.dw.com/p/5GIWo VW has 60% more employees than Toyota, which makes a similar number of cars Image: Moritz Frankenberg/dpa/picture alliance Advertisement Volkswagen has built one of the largest workforces in the global auto industry .
At nearly 630,000 people — 680,000 if you count joint ventures in China — VW employs around 60% more workers than Toyota , 140% more than Stellantis and nearly 240% more than Ford.
That headcount was once a sign of Germany's industrial might and VW's huge profits. Now, it's become a massive burden, one that's forcing the company to make painful job cuts to survive against agile Chinese competitors.
After already trimming thousands of positions last year as profits came under pressure , Volkswagen is now preparing to slash 50,000 additional jobs worldwide, including tens of thousands in Germany . The proposal got the backing of the VW Supervisory Board on Thursday, September 2.
VW also wants to close four German factories, a plan that the supervisory board on Thursday stopped short of agreeing to implement right away.
These cuts include VW luxury brands like Porsche and Audi. Other German automakers and suppliers are facing similar pressures. Mercedes-Benz is planning to cut several thousand jobs, and suppliers like Bosch have announced large cost savings.
Much of VW's headcount issue stems from long-standing strategic decisions.
Meghan Ostertag, an analyst for economic policy at the US-based Information Technology and Innovation Foundation, says VW's much larger workforce was needed because the firm chose to control more stages of production than its peers.
"The company makes many of its components and software internally, increasing the demand for labor and, of course, labor costs," Ostertag told DW, adding that factory expenses in Germany can be "up to twice those of the competition."
Other experts point to an aggressive acquisition strategy over the years, which brought brands including Skoda, Porsche , SEAT and Bugatti into the VW fold — not to mention several truck makers.
"That strategy worked to some extent, but the complexities of integrating all those brands, supply chains and different designs make VW very complicated to operate," Daniel Harrison, senior automotive analyst at the London-based Ultima Media, told DW.
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Although Volkswagen survived the 2015 Dieselgate emissions scandal without suffering lasting financial damage, the company incurred massive costs and soon faced a new set of problems.
The company was slow to transition its production to electric vehicles (EVs) — just as Chinese EV makers gained serious traction and a technological edge. That delay contributed to slower sales in China , which accounted for a third of total VW sales, as well as softening demand in Europe and other key markets .
VW also repeated a mistake made by the US auto industry decades earlier. In the 1960s and 1970s, the Big Three — Ford, GM, and Chrysler (now part of Stellantis) — were bloated and slow to adapt when Japanese and European competitors began eating into their market share.
By the time US carmakers shifted toward leaner production methods, a decade had passed, and they had fallen significantly behind, noted Ostertag.
Toyota, which produces a similar number of vehicles as VW, operates with nearly half as many workers by relying more on suppliers, higher automation and a simpler management structure.
In a research note, auto industry analyst Matthias Schmidt pointed to another factor: the "stranglehold" that trade unions and a key shareholder have over VW. This, he said, had helped cause "years of neglect in readjusting workforce numbers."
The northern German state of Lower Saxony — home to Volkswagen's global headquarters in Wolfsburg — holds 20% of the company's voting rights, can veto major decisions, and has previously pressured executives not to close plants or lay off staff, notably during the Dieselgate and COVID supply chain crises. It's ramping up the pressure this time, too.
Over the decades, Germany's powerful unions, meanwhile, have repeatedly held out for high wage increases and generous benefits, which have made VW staff among the best-paid autoworkers in the world.
Analysts warn that the company may have to cut more than the annual €4 billion the firm hopes to save to secure its future.
The current proposals to cut 50,000 additional jobs, they say, will bring savings and help improve short-term profitability. But VW's underlying cost base and slow decision-making culture mean deeper, more radical reforms may well be needed.
VW should "invest more heavily in automation," Ostertag told DW, adding that it would allow the carmaker to "better compete with leaner firms," such as China's BYD , one of the fastest-growing EV brands in Europe.
Analysts say VW has lagged peers in plant automation levels but has stepped up investments in robotics and digital upgrades for its EV production. The company is also planning its first sub-€20,000 EV next year.
With China responsible for around 30% of VW's global vehicle output, Harrison predicts more production shifts to Asia and the potential to share VW's European plants with Chinese EV producers, a move previously seen as "unthinkable."
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On the policy front, the German government is providing subsidies and loans for domestic EV battery plants to help reduce reliance on Chinese imports.
The European Union , meanwhile, is advancing the Industrial Accelerator Act…
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