VW's Collapse: How Germany's Auto Giant Became Detroit
Summary of the video “VW stürzt Deutschland ins Verderben | Volkswagen | Detroit | Entlassungen | Werksschließungen” by Horst Lüning (UnterBlog).
Volkswagen is cutting 100,000 jobs by 2035 (doubled from 50,000) due to plummeting profits, declining sales, and decades of mismanagement. The company's productivity has fallen 20%, bloated product range, arrogance, and political/union control via the VW Law prevented modernization. Factory closures in Wolfsburg, Hanover, Zwickau, and Neckarsulm will devastate entire cities—some 50% dependent on VW employment—triggering cascading failures in suppliers, local businesses, and regional finances. Germany faces a Detroit-like industrial collapse.
The Crisis: Job Cuts Doubled
Job Cuts Escalation
Volkswagen initially announced 50,000 job cuts by 2030 (35,000 at core VW brand), but this has now doubled to 100,000 cuts by 2035. The increase stems from collapsing profits and inability to raise prices further without losing customers to cheaper Skoda and Seat alternatives.
Why Profits Are Collapsing
VW sales dropped from 10.8 million vehicles (2017) to 8.98 million (2025). Simultaneously, costs rose while prices hit their ceiling due to price elasticity limits. The company cannot raise prices further without losing market share to competitors.
Productivity Crisis: The 20% Collapse
Vehicles Per Employee Dropped 20%
In 2017, VW produced 16.7 vehicles per employee annually. By 2025, this fell to 13.4 vehicles per employee—a 20% productivity decline despite global automation and AI advances. This metric reveals that modernization efforts failed entirely.
The 135,000 Employee Surplus
If VW had achieved normal 20% productivity gains since 2017 (as competitors did), it should produce ~20 vehicles per employee. With 10.7 million 2017 units, this requires only 535,000 employees. VW has 670,000, creating a surplus of 135,000 redundant workers. The announced 100,000 cuts still leave 35,000 excess.
Root Causes: The VW Law & Political Control
The VW Law: 70% Political-Union Control
The VW Law gives employee representatives (IG Metall union) 50% supervisory board control and Lower Saxony state 20%, totaling 70% red/red-green political control. Independent shareholders have no say. This structure prevents entrepreneurial decision-making and modernization, favoring job preservation over efficiency.
Red-Green Government Failure (2013–Present)
Lower Saxony's red-green coalition has governed since 2013 under SPD Minister-President Stephan Weil (longest-serving in state history). Political ideology prioritized job preservation over modernization, preventing necessary restructuring and investment in automation, robotics, and AI.
External Pressures: Regulation, Diesel, Fines
EU Environmental Regulations & Combustion Engine Death
EU environmental regulations shifted from the Transport Ministry (lobbied by VW) to the Environment Ministry (not lobbied). Managers failed to resist politically, instead lying about compliance. From 2035, no combustion engine can meet EU limits, making them illegal. This cowardly capitulation cost VW strategic flexibility.
Diesel Scandal & 30 Billion Euro Fine
VW's focus on diesel engines (pushed via 'Clean Diesel' campaigns) backfired when the scandal broke. The 30 billion euro fine equals 2–3 years of VW's peak profits (pre-2018) or 4–7 years of current profits. This capital could have funded modern robot factories and AI integration.
Strategic Blunders: Product Range & Arrogance
Excessive Model Variants & Complexity
VW offers 140–150 models with countless color and equipment combinations, far exceeding competitors. This complexity inflates costs in logistics, inventory, and production. Competitors like Ford (historically) or Asian makers use 2–3 variants and 3–5 colors, drastically reducing overhead. VW's arrogance in customization made it uncompetitive.
Discontinuing Best-Sellers at Peak Sales
Porsche discontinued the Macan (84,000 deliveries in 2025, best-selling Porsche ever) at the height of its sales cycle. VW also killed the Touran, Sharan, and UP. An entrepreneur would have milked these cash cows; employed managers think only 4–5 years ahead (contract horizon) and preemptively kill winners.
Factory Closures: Four Plants in Focus
Four Plants Targeted for Closure
Emden, Hanover, Zwickau, and Neckarsulm are under closure consideration, affecting 40,000–50,000 employees total. These plants have high costs and no fixed successors for current model variants. However, 60,000 more cuts must come from other plants and group companies to reach 100,000.
Cascading Economic Collapse
City Dependency on VW Employment
Wolfsburg is ~50% VW-dependent, Neckarsulm ~30%, and Zwickau ~11–12%. Entire families worked at VW across generations. Mass layoffs will devastate these cities' tax bases, real estate values, and local businesses (butchers, bakers, hairdressers). Cities will face municipal finance crises.
Supplier Industry Collapse (2–3 Employees Per VW Worker)
For every VW employee, 2–3 supplier industry workers depend on orders. With 100,000 VW cuts, 200,000–300,000 supplier jobs are at risk. Small and medium suppliers lack severance budgets; they face bankruptcy, wage compensation claims, and closure. ZF and Bosch alone plan 36,000 cuts by 2030.
Real Estate & Banking Crisis Risk
Unemployed workers cannot service mortgages; properties flood the market simultaneously, collapsing values. Banks hold these properties on balance sheets at original valuations to hide losses (as in 1980s crises). Defaulting loans force revaluation, potentially triggering a banking crisis.
State Tax Revenue Collapse
Laid-off workers pay less income tax and social contributions; unemployment insurance costs rise. Cities lose trade tax and wage tax allocations (~15% of VAT). Lower Saxony's state budget, already stressed by rising long-term bond interest rates (market doubts German solvency), will face severe shortfalls.
Market Signals: Stock Price Collapse
VW Share Price: 5-Year Collapse
VW stock peaked at €220 per share and fell to €70 by July 2026—a two-thirds loss. Normally, layoff announcements boost share prices (investors expect profit recovery). Here, the price falls despite cuts, signaling investor belief that worse is coming and the company's problems run deeper than workforce reduction can fix.
The Detroit Parallel
Greetings from Detroit: Industrial Collapse Ahead
Wolfsburg, Hanover, and Zwickau face the same fate as Detroit after Ford and GM decline. Once-thriving industrial cities will slowly die as anchor employers vanish, taking tax bases, real estate values, and supplier ecosystems with them. Political mismanagement and union-dominated governance prevented the modernization that could have saved these communities.
Notable quotes
Sometimes I hate it when I'm right, don't you? — Horst Lüning
Politics is slow, politics is left-leaning, and nobody wants to hear that this is bad for the company. — Horst Lüning
The share price falls despite cuts, signaling the worst is not yet over. That's still to come. — Horst Lüning