Volkswagen's surprise turnaround deal averts showdown as job cuts loom

Volkswagen shares soared to an 11-week peak on Thursday as the supervisory board unveiled a bold restructuring plan, averting a potential stakeholder showdown. The agreement, aimed at the automaker's largest restructuring in its 89-year history, includes 50,000 additional job cuts, totaling 100,000 across the group. This move comes amid mounting pressure from US tariffs, declining sales in China, and fierce competition from Asian rivals in Europe.

Volkswagen's operating margin, already weakened to 3.8% in the first half of the year from a decade-high of 7.9% in 2022, had become a major concern. Despite the relief among shareholders and analysts, executives stressed that the real challenge lies in executing the plan. Union Investment's Moritz Kronenberger cautioned that the "ball is now entirely in the executive board's court," while Citi analysts noted that the agreement doesn't change the broader EU competitive landscape or pressure from China and raw material costs.

Volkswagen CEO Oliver Blume hinted that half of the savings would need to come from Germany, suggesting around 25,000 job cuts in local operations. Meanwhile, Lower Saxony's state premier, Olaf Lies, urged management to explore alternative solutions for its German plants, emphasizing that closing them in Germany isn't inevitable.