By Tarik Dias Hamdan
Volkswagen beyond the car industry
Major developments are unfolding at Volkswagen in Germany, with implications that go beyond the company itself. Volkswagen is not merely a carmaker: it is one of the central symbols of German coordinated capitalism, built on social partnership between management, workers, trade unions and, in Volkswagen’s case, the state. The restructuring plans may point to a broader shift in German capitalism, in which worker participation remains institutionally present but is increasingly pushed into a defensive and subordinate role.
In late June, reports emerged of Volkswagen’s “Group Target Picture 2030”, a restructuring plan that could involve up to 100,000 job cuts worldwide and possible many plant closures in Germany such as the Zwickau, Emden, Hannover and Neckarsulm factories. The plan also aims to reduce factory costs from around €4,000 to less than €3,000 per vehicle and to simplify and recentralise the group. This includes reducing production complexity, reorganising divisions such as passenger cars and components into more autonomous entities under a new holding company, and selling stakes in companies no longer considered central to Volkswagen’s core business.
Taken together, these measures indicate a major break with Volkswagen’s traditional growth model. For decades, the company expanded by producing more cars, adding new brands, building new plants and relying on economies of scale. Now, Volkswagen appears to be moving in the opposite direction: reducing complexity, cutting costs, shrinking its factory network and lowering production capacity, while still aiming for a 9% profit margin by the end of the decade.
Why Volkswagen’s governance structure matters
The institutional significance of this plan lies in Volkswagen’s distinctive governance structure. German capitalism, especially in large industrial firms, has long been associated with worker participation through works councils (Betriebsräte) and Supervisory Boards (Aufsichtsräte). In Volkswagen’s case, this model goes even further. Workers hold half of the twenty seats on the Supervisory Board, three of which are reserved for trade union representatives. In addition, the state of Lower Saxony holds two shareholder seats. This three-actor composition—shareholders, workers and the state—strengthens the German model of social partnership inside Volkswagen. Its importance is reinforced by the Volkswagen Law of 1960, which requires a two-thirds majority in the Supervisory Board for major strategic decisions, such as factory closures or new investments. In practice, the state of Lower Saxony has usually defended employment-related interests and opposed major restructuring measures with significant employment effects.
This means that any structural decision in the corporation must take into account the position of workers and the state. Together, these actors have significant leverage against other shareholders and can constrain unilateral decisions by management or private owners.
The broader issue is that the German automotive industry is being destabilised by rapid transformations in the vehicle market, particularly the shift to electric and software-defined vehicles. . These are precisely the areas in which Chinese manufacturers have gained significant advantages over their German competitors. Volkswagen’s crisis is therefore not an isolated case.
The defensive turn of German social partnership
Capital–labour relations at Volkswagen had already been severely affected during the 2024 crisis, when the company attempted to suspend its long-standing job security agreement and signalled the possibility of closing three factories in Germany. The conflict ended with a negotiated settlement: the union accepted the reduction of around 35,000 jobs through voluntary measures, while the company maintained the employment guarantee until 2030, albeit alongside wage restraint.
What now appears to be happening is that, through Volkswagen’s offensive in 2024 and its renewed restructuring plans, the highly institutionalised model of social partnership between capital and labour is being contested from the capital side. This contestation is driven by the company’s difficulties in managing the technological transition, especially electrification and digitalisation. A similar argument can be extended to other sectors of the German economy. As Wolfgang Münchau argues, Germany’s economic model underinvested in twenty-first-century technologies and remained strongly attached to twentieth-century industrial strengths, such as steel, coal and, above all, the combustion-engine automotive sector.
Volkswagen’s proposed measures could significantly reduce the influence of workers and the state within the group. By turning divisions such as passenger cars and components into more autonomous entities under a new holding structure, the reorganisation could reshape internal power relations and alter how the Volkswagen Law operates in practice. Even if the law remains formally untouched, strategic decisions could shift to arenas where workers and Lower Saxony have less influence.
Volkswagen’s threats to cut costs, relocate production or withhold new models from underperforming plants also mark a departure from its traditional pattern of industrial relations. Restructuring was historically mediated through negotiations among management, works councils, IG Metall and Lower Saxony. The current offensive suggests a more confrontational approach, in which worker participation is treated less as a basis for joint decision-making and more as an obstacle to corporate adjustment.
Conclusion
This crisis shows that even highly protected sectors, with strong unions and institutional power, are being subjected to renewed employer offensives and pushed into a more defensive position. More importantly, Volkswagen’s crisis points to a broader crisis of social partnership between capital and labour. The difficulty of reaching stable compromises suggests that German institutions are losing some of their capacity to reconcile competitiveness with social protection. Institutions that once supported profitability while securing relatively good working conditions are now under pressure from technological change, global competition and demands for cost reduction.
This conflict also has implications beyond Germany. It suggests that labour institutions must be rethought to sustain social partnership under changing forms of capitalism. Germany’s model, including Volkswagen’s system of co-determination, was shaped by post-war state intervention rather than market forces alone. The state may therefore need to create new arenas for dialogue among workers, trade unions, firms and public authorities, while guiding technological change in ways that preserve both corporate viability and social protection. Future partnerships are likely to depend less on company-level governance and more on multi-level planning involving a broader range of actors.
About the author
Tarik Hamdan is a PhD candidate in Sociology at the Federal University of Rio de Janeiro (UFRJ) and was a visiting researcher at Ruhr University Bochum, Germany. His academic interests include industrial relations, employment relations, and trade unionism from a comparative perspective. His doctoral research examines how trade unions respond to corporate restructuring in Germany and Brazil, with a particular focus on Volkswagen.
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