Volkswagen shares rally after board approves radical restructuring plan

Volkswagen shares surged over 4% in early German trading on Friday after the automaker's supervisory board approved a major restructuring plan. The plan, named Future Plan 2030, aims to double planned job cuts to 100,000 and halve its model lineup by around half. This decision came as a surprise, considering the board's past history of internal disagreements.

Volkswagen called it the most strategically profound transformation program in its history. The plan calls for narrowing the model range by about 75% by 2035, eliminating 50,000 jobs, including management positions, on top of the roughly 50,000 cuts already agreed upon in the past two years. Analysts view the unanimous approval of this strategic plan as a fundamental breakthrough, marking the start of a new phase and addressing one of the biggest investor concerns - the company's ability to make difficult decisions to tackle its challenges.

The restructuring plan comes amid U.S. import tariffs, weak demand in Europe, and mounting pressure from Chinese competitors, all of which have impacted Volkswagen's profitability. The company's operating margin was just 3.8% in the first half of the year. By reducing its model range, Volkswagen hopes to boost per-model production volumes, cut costs, and incorporate more advanced technology.

However, the finer details of plant closures remain unresolved, with Volkswagen promising to develop a competitive production plan for its European sites by June 2027.