Volkswagen Group CEO says slim profit margins are the company's underlying problem.
More cost-cutting measures are planned across all areas of the business.
Reports suggest up to 120,000 jobs could be cut, or roughly a fifth of the company's workforce.

Ford CEO Jim Farley once explained that core models like the Fiesta, Focus, and Mondeo were not discontinued because of weak sales. Instead, these vehicles were retired since the company was not generating enough profit from them. Elevated production costs eroded margins, rendering the models unprofitable and ultimately leading to their removal.

Fast-forward to 2026, and the Volkswagen Group faces a similar challenge across its extensive range of brands and models. In a recent interview, CEO Oliver Blume highlighted that the issue does not arise from insufficient demand but rather from profitability concerns: "Our products are very popular - but we are not making enough money on them. That is why we need to further reduce our costs - across all cost categories."

However, not every product enjoys equal popularity within the vast VW Group. The automotive conglomerate has already unveiled a stringent cost-cutting plan that could effectively halve its product portfolio. Up to 50 percent of the models offered by the VW core brand, Audi, Skoda, Lamborghini, Porsche, Bentley, SEAT, and Cupra could be discontinued in the coming years. The company aims to reduce complexity by focusing on highest-volume products and those with the strongest profit margins. An unconfirmed preliminary list includes 10 models potentially facing elimination, such as the Jetta and Taycan.

Fewer Models, Bigger Profits

Blume emphasized the intent to streamline the VW Group for improved performance: "In the future, we want to increase sales per model. To achieve this, we are consistently streamlining our product portfolio." Beyond removing numerous models from the extensive lineup, the company plans to cut the number of available options for remaining models by up to 75 percent.

Notably, there was no reference to plant closures in the company's recent announcements or in the interview. This comes despite plans already in place to reduce annual production capacity to 9 million vehicles, representing 1 million fewer than current levels. Reports allege that the Zwickau, Emden, Hanover, and Neckarsulm factories may be at risk, though these claims remain unconfirmed by the VW Group.

Up To 120,000 Layoffs?

Reports indicate that layoffs could extend well beyond the previously announced 50,000 job reductions. The VW Group may cut its workforce by as many as 120,000 employees, equating to roughly a fifth of its global headcount. This figure remains speculative at present. Nevertheless, the automotive giant seeks to scale back operations to address high labor and energy costs by concentrating on its most profitable offerings.

Of the eight car brands under the VW Group umbrella, only Skoda has released a separate statement following the parent company's cost-cutting announcement. A spokesperson for the Czech automaker indicated there is "no immediate impact on our operations" and that the company's factories continue to operate at full capacity.

Analysis: A significant shift is underway in Wolfsburg, making it clear that the previous business model is no longer sustainable. High production costs, excessive model complexity, and intense competition have all played a role in the challenges facing this automotive giant. The VW Group possesses the resources to recover, but only after substantially reducing the scale of its operations.

The Volkswagen Group of tomorrow will differ markedly from today's version, and conditions are likely to deteriorate further before any improvement occurs.