VW profit falls 28% as factories sit idle

Oliver Blume, Volkswagen's CEO, told shareholders this week he sees "smarter solutions" than closing German factories (Spiegel). Across Europe, from Bratislava to Martorell, workers are asking a sharper question: which plant gets the next model? That decision, made quietly in Wolfsburg, determines whether a factory thrives or slowly starves. No closure document required.

The profit squeeze forcing the choices

VW's Q1 2026 net profit fell 28% year on year to €1.56 billion (Euronews). The sharpest pain came from China, once VW's biggest money-maker, where first-half deliveries dropped 26.1% to 971,000 vehicles, the lowest since 2010 (SCMP, Yahoo/AP). Western European sales grew modestly, but a few percentage points of growth cannot replace losing a quarter of your Chinese volume.

The response is VW's four-year plan: fewer models, a simpler lineup, and a group built around lower production volumes (Euronews, Topky). The figures driving public anxiety, four German plant closures and up to 100,000 jobs, are still scenarios, not board decisions (FAZ). But the financial logic behind those scenarios is real.

Here is the core problem. European auto plants ran at roughly 59% utilisation in 2025, according to BCG analysis (Handelsblatt). A factory running at 59% still pays for its machines, its buildings and its permanent staff. Those fixed costs don't shrink when production does. Break-even requires around 80%. Nearly a third of European plants are, by this measure, surplus.

Model allocation: the mechanism that kills without a headline

"Model allocation" is Wolfsburg deciding which factory builds which car, and for how long. A new model brings years of full shifts, supplier orders and local tax revenue. Missing the next one hollows out a plant over several years while its employment protections technically hold.

German sites like Emden, Zwickau and Osnabrück sit in exactly this limbo. A December 2024 deal between VW and IG Metall (Germany's largest industrial union) protects nine German plants until 2030 and bars compulsory redundancies (Tagesschau, Handelsblatt). But protection without a successor model is a countdown. Dresden ended vehicle production in 2025. Osnabrück's T-Roc Cabrio line runs only until late summer 2027 (Automobil Produktion). IG Metall has called nationwide protests, treating the leaked closure scenarios as a live threat (Deutschlandfunk).

How this crosses borders

Outside Germany, workers have fewer protections and shorter notice. In Slovakia, machinery and transport equipment account for more than 60% of total exports (Teraz). Reports that Porsche Cayenne production might shift from Bratislava to Leipzig remain unconfirmed (Aktuality). But the fear is rational. Lose one model from a country that dependent on auto exports, and the damage runs through suppliers, logistics firms and the national trade balance.

In Spain, unions at Martorell are less worried about immediate layoffs than about whether the plant receives a second EV platform (the shared technical base on which several electric models are built). That decision shapes workload into the 2030s (elDiario.es).

Portugal's Palmela plant shows how the squeeze already works in practice. Work-suspension measures affected 3,742 of 4,900 workers even as daily output per shift rose (The Portugal News). The factory gets more efficient. Fewer people share the work.

Who gains, who loses

German permanent workers at protected sites gain time, up to 2030. Blume points to 28,000 voluntary departures already agreed as proof that restructuring can proceed without forced cuts (Finanzen). Lower-cost plants in Portugal, Poland or Slovakia may gain production as VW shifts work to cheaper sites.

The losers are less visible. Temporary workers absorb the first shocks everywhere. Suppliers without the bargaining power to pass cost increases back to VW eat the margin compression. And workers at plants between protection deals and missing successor models live with a corrosive uncertainty that headline employment figures never capture.

VW does not need to formally close a plant for workers and suppliers to lose. If successor models go elsewhere, the economic damage starts years before any closure decision. Unless Wolfsburg later assigns replacement production, the slow squeeze is the restructuring.