Why some investors say Volkswagen is simply "not fixable"

Investors are growing increasingly skeptical about Volkswagen's ability to overcome its complex governance structure and persistent cost issues, labeling the German automaker as not fixable. However, the recent approval of Volkswagen's Zukunftsplan 2030 restructuring plan may begin to shift that perception, according to Deutsche Bank analysts.

The skepticism had primarily stemmed from investors questioning whether Volkswagen's management could make the necessary tough decisions to tackle these problems within the company's governance structure. The approved plan maintains Volkswagen's core restructuring targets, such as eliminating around 50,000 jobs by 2030 and streamlining the company's portfolio by approximately one-third.

Moreover, Volkswagen plans to leverage China as an export hub for the Global South, focusing on margins, free cash flow, capital efficiency, and competitiveness. The company acknowledges roughly 500,000 units of excess European production capacity, particularly at plants in Emden, Zwickau, Hannover, and Neckarsulm, which lack competitive successor allocations beyond 2031-2034.

Instead of immediately closing these facilities, Volkswagen has granted them until June 2027 to reduce costs and potentially secure future production. Alternative uses for these plants are also under consideration. While plant closures can be among the costliest restructuring options, resolving Germany's structural cost disadvantage is crucial for a sustainable turnaround.

If the affected sites cannot improve their competitiveness beyond the early 2030s, vehicle production there is unlikely. The approval of the restructuring plan could have broader implications for European automakers facing slower growth, excess manufacturing capacity, Chinese competition, and pressure on returns. However, execution remains the crucial test.

While the agreement does not entirely resolve Volkswagen's issues, it addresses a significant investor concern by demonstrating that difficult restructuring decisions can garner approval. Deutsche Bank has maintained its Buy rating and €115 price target on Volkswagen, suggesting roughly a 51% upside compared to the September 3 closing price of €76.36.