The Volkswagen crisis: reorganisation – fewer models and reduced production

Volkswagen is set to close four plants in Germany and make thousands of people redundant. Rumours have emerged in the German press just a few days after the programme was presented by the Board of Management to the Supervisory Board, where the group led by Oliver Blume outlined a plan comprising various strategic initiatives and targets for 2030. This programme sets out in black and white the closure of plants and redundancies; however, among the immediate priorities are the reduction of complexity and the number of variants within the product range, closer alignment between products, technologies and the specific characteristics of regional markets, the adaptation of production capacity to changing demand, and the simplification of the Group’s organisational structures and investment portfolio.

In short? Fewer models and variants, a reduction in production capacity to bring it into line with demand, the divestment of businesses not strictly related to the automotive sector, the production of cars that meet the demands of key markets, starting with China, and leaner structures in terms of non-production staff. Although the picture appears complex, the VW Group continues to lead the European market in terms of new car registrations and, by 2025, for the first time, its market share in electrified vehicles will exceed that of vehicles with internal combustion engines.

Streamlined product range and reduced complexity
The range of models will be progressively streamlined by up to 50 per cent and focused on the most attractive market segments. At the same time, the complexity of the range – for example, in terms of available configurations and equipment – will be reduced by up to 75 per cent. So, is this the end of long lists of models and variants? Not quite, as demonstrated by what is happening at Audi. The Ingolstadt-based brand has streamlined its range by phasing out the A1 and Q2, focusing new and upcoming models on three platforms: MEB and PPE for electric vehicles, and PPC for hybrid models.

These platforms will underpin new models such as the Q2 e-tron and Q9. The model range has also already been streamlined, with far fewer options than in the past and more comprehensive trim levels designed to reduce production complexities. Oliver Blume, CEO of the Volkswagen Group, stated: ‘Our goal is clear: by 2030, we want to make the Volkswagen Group the world’s most attractive car manufacturer, thanks to iconic brands, products that inspire, cutting-edge technologies, solid financial results, a reliable track record on the capital markets and a strong team culture. With our plan for the future, we are entering the next phase of our transformation, building on our strengths and capabilities. We are making the Volkswagen Group faster, more resilient and more competitive: by reducing complexity, focusing more closely on strategic technologies, aligning products, development and production even more closely with the needs of regional markets, optimising production capacity, streamlining our portfolio of shareholdings and adopting leaner organisational structures. In this way, we are creating the conditions for lasting success, even in an increasingly challenging environment.’

Cariad’s failure has taught the Volkswagen Group the importance of eliminating structures that are unnecessary and unable to meet diverse requirements. The key technological areas relating to platforms, electronic architectures and software systems will, in fact, be further harmonised and developed in line with the needs of the various global markets. The aim is to make the most of synergies within the Group and eliminate technological overlaps.