VW profits fall as factories idle

Oliver Blume, Volkswagen's chief executive, told shareholders this week that he sees "smarter solutions" than closing German factories (Spiegel). On the factory floor, from Bratislava to Martorell, the question is more practical: who gets the next model? In the car industry, that decision can keep a town in work for years. It can also leave a plant fading long before anyone signs a closure notice.

The profit squeeze forcing the choices

VW's first-quarter net profit fell 28% year on year to €1.56 billion (Euronews). The real wound is China, once the group's great engine of profit. Deliveries there fell 26.1% in the first half to 971,000 vehicles, their lowest level since 2010 (SCMP, Yahoo/AP). Western Europe grew a little, but a modest recovery at home cannot make up for losing a quarter of Chinese volume.

The answer from Wolfsburg is a four-year plan built around fewer models, a simpler range and lower production volumes across the group (Euronews, Topky). The figures causing political alarm, four German plant closures and up to 100,000 jobs, remain scenarios rather than board decisions (FAZ). The arithmetic behind them is harder to dismiss.

European car plants ran at roughly 59% utilisation in 2025, according to BCG analysis (Handelsblatt). A factory running at 59% still has to pay for machinery, buildings and permanent staff. Those costs do not fall neatly with output. Break-even is around 80%. On that basis, almost a third of Europe's car factories are surplus to requirements.

Model allocation: the mechanism that kills without a headline

"Model allocation" sounds harmless enough. It is simply Wolfsburg deciding which factory builds which car, and for how long. In practice, it is the lever that decides whether a plant has full shifts, supplier orders and local tax revenue for the next cycle. Miss out on the next model, and a factory can be hollowed out slowly while its formal employment protections remain intact.

That is where German sites such as Emden, Zwickau and Osnabrück now sit. A December 2024 deal between VW and IG Metall, Germany's largest industrial union, protects nine German plants until 2030 and rules out compulsory redundancies (Tagesschau, Handelsblatt). But protection without a successor model is only a slower 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 an immediate threat (Deutschlandfunk).

How this crosses borders

Beyond Germany, workers usually have thinner protections and shorter warning. Slovakia shows why the anxiety travels so quickly. Machinery and transport equipment account for more than 60% of total exports there (Teraz). Reports that Porsche Cayenne production could move from Bratislava to Leipzig are still unconfirmed (Aktuality). The fear, though, is rational. Take one model away from an economy that dependent on car exports and the hit runs through suppliers, logistics companies and the trade figures.

In Spain, unions at Martorell are not mainly braced for immediate layoffs. Their concern is whether the plant gets a second EV platform, the shared technical base used for several electric models. That decision will shape the workload well into the 2030s (elDiario.es).

Portugal's Palmela plant gives a glimpse of what the squeeze looks like on the ground. Work-suspension measures affected 3,742 of 4,900 workers even as daily output per shift rose (The Portugal News). The factory becomes more efficient. Fewer people get the work.

Who gains, who loses

German permanent workers at protected sites have bought time, in some cases until 2030. Blume points to 28,000 voluntary departures already agreed as evidence that restructuring can be done without compulsory cuts (Finanzen). Lower-cost plants in Portugal, Poland or Slovakia could gain work if VW shifts production towards cheaper sites.

The losses will be less tidy. Temporary workers take the first blow almost everywhere. Suppliers without the leverage to pass higher costs back to VW absorb the margin pressure. And workers in plants that are protected on paper but missing their next model live with an uncertainty that never shows up properly in headline employment numbers.

VW does not have to close a plant formally for workers and suppliers to lose. If replacement models are allocated elsewhere, the damage begins years before any closure decision. Unless Wolfsburg assigns new production later, the restructuring is already under way.