Volkswagen’s leadership views the Group’s economic situation in June 2026 with unusual severity. Six of the nine senior executives surveyed see an existential threat, while three describe the situation as strained. Declining profits, high costs, overcapacity, and a loss of market share in China are undermining the existing business model. In addition, US tariffs, weak results from individual brands, and high investment costs are weighing on the automaker. The consequences affect approximately 663,000 employees, numerous plants, suppliers, and shareholders.
Corporate leadership sees an existential threat and calls for a change of course
The eight members of the executive board and the designated Porsche boss, Michael Leiters, participated in the internal survey. Members of the supervisory board were also asked to provide their assessments. The results were apparently incorporated into a strategy paper presented by CEO Oliver Blume in late April.
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All nine managers surveyed considered a fundamental restructuring necessary. They were particularly critical of the strategies pursued to date in China and North America. The threat to the company’s survival stems not from acute insolvency, but from long-term structural weaknesses. Consequently, Volkswagen must simultaneously overhaul its cost structures, development processes, and production operations.
Profits plummet despite high revenue
Financial results explain this stark internal assessment. In 2025, Volkswagen generated revenue of just under €322 billion. However, operating profit fell by 53.5 percent to approximately €8.9 billion. As a result, the operating return on sales dropped from 5.9 percent to 2.8 percent.
The Group continues to hold substantial financial reserves. Net cash flow in the automotive division rose to €6.4 billion in 2025, and net liquidity stood at around €34.5 billion at year-end. While these funds secure investment, they do not resolve the issue of weak profitability.
China, tariffs, and overcapacity exacerbate the situation
China remains critically important for Volkswagen, having long been a source of high profits. However, manufacturers such as BYD and Geely are now gaining market share; they develop new electric vehicles more quickly and often produce them at lower costs. Volkswagen must therefore better tailor its model strategy to Chinese customers and shorten development cycles.
North America also presents challenges for the Group. Higher US tariffs are driving up the cost of European imports, while additional plants require significant investment. Furthermore, there is substantial overcapacity in Europe. Volkswagen therefore plans to cut around 50,000 jobs in Germany by 2030.
Existing Business Model Losing Its Foundation
For decades, Volkswagen produced vehicles in large volumes in Germany and sold them worldwide. However, this export-led model is becoming increasingly less effective. China is placing greater emphasis on domestic manufacturers, while trade barriers are driving up the cost of accessing other markets. Consequently, the group needs more regional supply chains and market-specific vehicles.
The threat to the company’s existence thus stems from a potential long-term decline in its significance. While Volkswagen still boasts strong brands, high revenues, and substantial cash reserves, a lack of higher margins means it will eventually lack the billions needed for software, batteries, and new models. Furthermore, additional jobs and production capacities could be at risk.
Author: Blackout News
Sources: Manager Magazin (16.06.26) – t-online (16.06.26) – Wolfsburger Allgemeine (16.06.26) – Volkswagen Group (10.03.36)