Its Cars Aren’t Profitable Enough

Ford CEO Jim Farley once said core models like the Fiesta, Focus, and Mondeo/Fusion weren’t phased out because they were selling poorly. Instead, these cars were retired because the Blue Oval wasn’t making enough money from them. High production costs ate into profit margins, rendering them unprofitable and ultimately forcing Ford to pull the plug on three of its longest-running nameplates.

Fast-forward to 2026, and the Volkswagen Group is facing a similar issue across its vast portfolio of brands and models. In an interview with German newspaper Bild, CEO Oliver Blume pointed out that the problem doesn’t stem from a lack of demand but from a profitability issue: “Our products are very popular—but we’re not making enough money on them. That’s why we need to further reduce our costs—across all cost categories.”

But not every product is equally popular within the vast VW Group. The automotive conglomerate has already announced a draconian cost-cutting plan that could effectively halve its product portfolio. Up to 50 percent of the models sold by the VW core brand, Audi, Skoda, Porsche, Bentley, SEAT, and Cupra could be eliminated in the years to come. The company wants to reduce complexity by prioritizing the highest-volume products and those with the biggest profit margins.

Speaking with Bild, Blume reiterated that he wants to downsize the VW Group to turn things around: “In the future, we want to increase sales per model. To achieve this, we are consistently streamlining our product portfolio.” Aside from eliminating a plethora of models from its massive lineup, the company will reduce the number of available options for the surviving models by up to 75 percent.

Interestingly, there was no mention of plant closures in the press release the company issued last week or in Blume’s interview with the German newspaper. That’s despite the Group already announcing plans to cut annual production capacity to 9 million vehicles, or 1 million fewer than today. German business publication Manager Magazin alleges the Zwickau, Emden, Hanover, and Neckarsulm factories are at risk of closure, but the VW Group hasn’t confirmed the report.

Bild claims the layoffs could extend well beyond the already announced 50,000 job cuts. The VW Group may reduce its workforce by as many as 120,000 employees, representing roughly a fifth of its global headcount. However, that figure remains a rumor at this point. Nevertheless, the automotive giant is looking to scale down operations to offset high labor and energy costs by focusing on its cash cows.

Of the eight car brands under the VW Group corporate umbrella, only Skoda has issued a separate statement following the parent company’s cost-cutting announcement. A spokesperson for the Czech automaker told Reuters there is “no immediate impact on our operations” and that the company’s factories are running at full capacity.

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Source: Volkswagen

Motor1’s Take: A storm is brewing in Wolfsburg, and it’s evident that the old business model just isn’t working anymore. High production costs, overwhelming model complexity, and unprecedented competition have all contributed to an automotive giant’s struggles. The VW Group has the strength to bounce back, but not before radically shrinking its business.

Tomorrow’s Volkswagen Group will look significantly different from today’s, and the already dire situation is likely to worsen before it gets better.