In Wolfsburg, Germany, the headquarters of a company that once symbolized the postwar German economic miracle, Volkswagen executives are preparing to shed as many as 100,000 jobs from a global workforce of 630,000. The cuts, among the largest in the company's 87-year history, mark a painful admission: the model that made Volkswagen one of the world's largest automakers has become the very thing threatening its survival.

For decades, Volkswagen's size was its strength. Now it is its liability. As Chinese electric vehicle makers such as BYD flood global markets with cheaper, faster-to-build cars, Volkswagen finds itself weighed down by a workforce, cost structure, and corporate culture built for a different era of manufacturing entirely.

A Workforce Built for a Different Era

Volkswagen's ballooning headcount is not an accident of mismanagement alone; it is the product of a distinctly European industrial model that took shape after the Second World War. Unlike American firms, where shareholder returns typically came first, companies like Volkswagen operated under a broader social contract. Employees, unions, and regional governments all held a stake in corporate decision-making, and job preservation was treated as a core responsibility of the firm, not merely a cost to be minimized.

That arrangement is written into Volkswagen's very ownership structure. The state government of Lower Saxony owns roughly 20 percent of the company's shares, and by law, no shareholder's voting rights can exceed that threshold, regardless of how many shares they hold. This gives regional politicians, who answer to voters worried about local jobs, an outsized and permanent say in company strategy. Volkswagen also pays out a comparatively modest share of profits as dividends, historically prioritizing reinvestment and workforce stability over shareholder payouts.

For much of the postwar period, this model worked. It produced strong labor relations, generous benefits, and a company that expanded steadily across brands, from Audi and Porsche to Skoda and SEAT, absorbing workers along the way. But it also meant Volkswagen grew accustomed to a cost base that assumed continued dominance in combustion-engine manufacturing, a business in which Germany's engineering expertise, supply chains, and skilled labor commanded a premium that customers were willing to pay.

The Chinese Challenge

Electric vehicles have upended that calculus. Battery-powered cars require fewer parts and less specialized labor to assemble than traditional internal combustion vehicles, eroding one of Volkswagen's historic advantages: its deep bench of engineering talent devoted to engines and transmissions. Chinese manufacturers, unburdened by legacy union agreements, decades-old pension obligations, or politically entrenched labor protections, have built EV production from the ground up, optimized for speed and cost.

The result is a competitive gap that Volkswagen has struggled to close. Chinese automakers now undercut European rivals significantly on price while matching or exceeding them on technology, particularly in battery efficiency and software integration. Volkswagen, meanwhile, has had to sustain a workforce sized for an earlier industrial logic while simultaneously funding the enormously expensive transition to electric platforms, a dual burden few competitors face at the same scale.

The cuts represent less a single crisis than the culmination of a slow-moving structural mismatch between Volkswagen's inherited size and the economics of a new industry.

What the Cuts Mean for Germany

The stakes extend well beyond Volkswagen's balance sheet. The automobile industry has long been a pillar of German industrial identity, much as Ford's assembly line transformed American manufacturing and society in the early twentieth century, spurring growth in glass, rubber, steel, and countless supplier industries. Volkswagen alone employs hundreds of thousands of German workers directly, and hundreds of thousands more indirectly through its vast supplier network concentrated in Lower Saxony and other industrial states.

A reduction of 100,000 jobs would ripple through this ecosystem, straining not just Volkswagen's own workforce but the smaller parts manufacturers, logistics firms, and regional economies that depend on the company's continued scale. It also tests the durability of the broader European social contract, the assumption that large employers bear responsibility for worker welfare even amid financial distress. Volkswagen's works council and IG Metall, Germany's powerful metalworkers' union, have historically resisted layoffs of this magnitude, and the scale of the proposed cuts suggests the company's leadership believes the old bargain is no longer sustainable.

An Open Question

Whether shedding 100,000 workers will be enough to restore Volkswagen's competitiveness remains uncertain. The company still faces the underlying challenge that made the cuts necessary in the first place: a Chinese EV industry that can build cars faster and cheaper, backed by state support and a manufacturing base unencumbered by the legacy costs Volkswagen is only now beginning to confront. Trimming headcount addresses the symptom of high costs, but it does not, by itself, solve the harder problem of matching Chinese firms on innovation speed and price.

What is clear is that Volkswagen's current predicament did not emerge overnight. It is the product of decades of choices, some rooted in genuine social commitment, others in institutional inertia, that allowed the company's workforce to grow well past what a rapidly changing global auto industry can now support. The layoffs represent Volkswagen's attempt to reconcile its twentieth-century identity with a twenty-first-century market that shows no patience for the mismatch.