Volkswagen’s restructuring and the decision-making cost of stability

On 3 September 2026, Volkswagen’s Supervisory Board unanimously approved the most extensive transformation programme in the Group’s 89-year history.

The Future Plan 2030 provides for a further reduction of approximately 50,000 jobs worldwide, on top of the roughly 50,000 already under way; a review of the industrial future of four German plants; an approximately 50% reduction in the model portfolio by 2035; a reduction of around one third in the portfolio of shareholdings and businesses; and a target operating margin of 9% by 2030. (Volkswagen Group)

The market reaction was immediate. Volkswagen shares closed the day up 7.9%. (Reuters)

At first glance, this is an industrial restructuring.

Not merely.

One of the measures approved concerns the very system through which decisions are made within the Group. The Supervisory Board asked management to develop a new organisational and decision-making model and announced that it would consider limiting the matters subject to its prior approval to those of material importance to the Group, with thresholds aligned with the standards observed among DAX companies. Volkswagen stated that it intends to establish clear allocation of responsibilities and faster, more efficient Group governance. (Volkswagen Group)

The company is not merely resizing factories, its workforce, brands and investments.

It is resizing the decision-making process itself.

1. The problem behind Volkswagen’s restructuring

Volkswagen remains one of the world’s largest industrial groups. In 2025, it delivered 8.98 million vehicles and generated €321.9 billion in revenue.

Yet operating profit fell from €19.1 billion in 2024 to €8.9 billion in 2025. The operating margin declined from 5.9% to 2.8%. (Volkswagen Group)

The problem does not stem from a single variable.

The company faces excess production capacity in Europe, growing competitive pressure from Chinese manufacturers, tariffs in the United States, high costs in Germany, technological transformation and an extremely complex portfolio.

In China, for decades one of the pillars of the Group’s international expansion, deliveries fell by 8.0% in 2025. Sales of fully electric vehicles declined by 44.3%, a movement the company attributes to the transition towards a new generation of locally developed electric models. Volkswagen acknowledges that Chinese manufacturers now compete not only on price but also through products and digital services better adapted to local consumers. (Volkswagen Annual Report 2025)

At the same time, Volkswagen estimates that its European production capacity currently exceeds demand by more than 500,000 vehicles per year. The plants in Emden, Zwickau, Hannover and Neckarsulm do not currently have guaranteed competitive allocation of new models during certain periods between 2031 and 2034. (Volkswagen Group)

Volkswagen’s restructuring therefore responds to a genuine economic problem.

But the difficulty of implementing it exposes another problem: the transformation must pass through one of the most complex governance structures in European capitalism.

2. Who controls Volkswagen?

Formally, the controlling shareholder is relatively easy to identify.

Porsche Automobil Holding SE holds 53.3% of the voting rights in Volkswagen AG. The State of Lower Saxony holds 20.0%, Qatar Holding 17.0%, and the remaining 9.7% is in free float. This distribution refers to voting rights: the company has 295,089,818 ordinary shares carrying voting rights and 206,205,445 preference shares without voting rights. (Volkswagen Group, as at 31 December 2025)

Porsche Automobil Holding SE, in turn, has an unusual structure. Its ordinary shares, which carry voting rights, are indirectly held exclusively by members of the Porsche and Piëch families. (Porsche Automobil Holding SE)

There is therefore a clearly identifiable form of indirect family control:

Porsche and Piëch families → Porsche Automobil Holding SE → Volkswagen AG.

It would be tempting to conclude that, by indirectly holding a majority of the votes, the family also has the ability to impose the company’s strategic direction.

This is precisely where the case becomes more interesting.

Corporate control and decision-making capacity are not necessarily the same thing.

3. A company with several centres of power

Volkswagen’s Supervisory Board consists of twenty members.

Ten represent the shareholders. The other ten represent employees under the German co-determination system. Among the shareholder representatives, two are appointed directly by the State of Lower Saxony for as long as it holds, directly or indirectly, at least 15% of the ordinary shares, pursuant to Article 11(1) of Volkswagen AG’s Articles of Association. (Volkswagen Annual Report 2025)

There is also the so-called Volkswagen Law.

Section 4(3) provides that resolutions of the General Meeting which are legally subject to a qualified majority require, at Volkswagen, more than four fifths of the capital represented. The provision turns Lower Saxony’s 20% stake into a blocking minority, a position that, under the general regime, would ordinarily require a holding of more than 25%.

Section 4(2) requires a two-thirds majority of the Supervisory Board for the establishment and relocation of production facilities. Because the Board is composed on a parity basis, the ten employee representatives can by themselves prevent decisions relating to factories.

The structure has been the subject of successive litigation before the Court of Justice in Cases C-112/05 and C-95/12. In the second case, decided in 2013, the Court dismissed the Commission’s action and held that Germany had fully complied with the 2007 judgement after removing other provisions found incompatible with EU law. The current rule requiring more than four-fifths of the capital represented therefore remained in force and continues to be a distinctive feature of the company’s power structure. (EUR-Lex)

The result is unusual.

Porsche Automobil Holding SE holds the majority of voting rights.

Lower Saxony holds a minority stake, has institutional representation on the Board and possesses blocking power over certain matters.

Employees occupy half of the Supervisory Board and hold a statutory veto over decisions concerning industrial location.

Management bears responsibility for running a global conglomerate undergoing a technological transformation that increasingly demands speed.

None of these powers is merely symbolic.

In July 2026, that became evident.

An earlier restructuring proposal submitted by management was rejected by the Supervisory Board on 9 July by 12 votes to 7, following opposition from employee representatives. The combination of labour representation and Lower Saxony formed a sufficient majority to prevent the plan from proceeding. (Reuters)

The company had a controlling shareholder.

But management did not have authorisation to carry out the proposed transformation.

4. When the power to prevent becomes part of the strategy

In the weeks that followed, the dispute escalated.

Management even considered convening an extraordinary General Meeting in an attempt to approve certain measures outside the Supervisory Board.

The alternative was extraordinary because it would have shifted the conflict to an arena in which employees have no direct vote and in which Porsche Automobil Holding SE, with 53.3% of the voting rights, occupies a far stronger position.

The solution, however, also involved uncertainty.

For certain structural matters, the Volkswagen Law would require more than four fifths of the capital represented, preserving the blocking capacity associated with Lower Saxony’s stake. There was, however, an argument in the opposite direction. Under section 111(4) of the German Stock Corporation Act (Aktiengesetz — AktG), where the Supervisory Board refuses to consent to a transaction that is subject to its approval, the Management Board may require the General Meeting to resolve on that consent. A resolution granting consent requires a majority of at least three quarters of the votes cast, and the Articles of Association may neither stipulate a higher majority nor impose additional requirements. In Volkswagen’s case, Reuters identified this provision as a possible legal basis for management’s strategy of resorting to an extraordinary General Meeting.

The applicable allocation of powers therefore remained disputed, and any conflict over it could have resulted in litigation. (Reuters)

What might appear to be an abstract legal debate came to determine the feasibility of one of Europe’s largest industrial reorganisations.

The question was no longer merely which strategy should be adopted.

It was who had the legitimacy and authority to approve it.

5. The agreement

The extraordinary General Meeting never took place.

Management, employee representatives, Lower Saxony and shareholders reached a compromise. On 3 September, the same Board that had blocked the earlier proposal unanimously approved the Future Plan 2030. (Reuters)

The outcome does not fully correspond to the original proposal of any of the parties.

Volkswagen acknowledged the need for drastic reductions in costs and capacity. Employee representatives accepted further workforce reductions. The future of certain industrial sites will remain under review. Some of the most controversial alternatives for corporate reorganisation were withdrawn or postponed. (Reuters)

The agreement did exactly what governance systems with multiple centres of power tend to do: it replaced a unilateral decision with a negotiated solution.

But there is an additional element.

The negotiation resulted in a review of the very system that had made it necessary.

6. Governance itself became part of the restructuring

Among the twelve initiatives in the Future Plan 2030 is the simplification of the Group’s structure.

Management is to develop a new organisational and decision-making model designed to reduce overlaps, create clearer responsibilities and accelerate decision-making.

More significantly, the Supervisory Board announced that it would consider limiting its prior approval rights to measures of material importance to the Group, with new thresholds aligned with the practice of DAX companies. (Volkswagen Group)

This deserves attention.

Volkswagen did not conclude that it needs to eliminate supervisory mechanisms, employee co-determination or the participation of different stakeholders.

It reached a more specific conclusion: not every decision needs to pass through the same degree of supervision.

That distinction matters.

Governance does not consist in maximising controls.

It consists in defining where control is necessary, who should exercise it, and in which decisions the organisation needs to preserve executive autonomy.

When every relevant decision must move successively through different layers of approval, control can reduce risk. But it also increases the organisation’s decision-making cost: the time, negotiation and resources required to transform strategic intent into action.

In relatively stable environments, that cost may be entirely acceptable.

In periods of disruption, the equation changes.

7. The paradox of stability

Volkswagen’s structure did not emerge by accident.

It embodies historical choices designed to balance capital, labour, regional interests and shareholder control.

Lower Saxony’s presence protects interests associated with a company whose economic importance extends far beyond its shareholders. German co-determination gives employees an institutional role in corporate supervision. The control exercised through Porsche Automobil Holding SE provides a reference shareholder with a long-term horizon.

Each of these elements can contribute to stability.

The problem emerges when different mechanisms of stability collectively produce a high number of veto points.

The 2026 restructuring exposes precisely that tension.

The same system capable of preventing management from unilaterally implementing a transformation with enormous social consequences also made a complex negotiation process necessary in order to respond to competitors that do not face equivalent decision-making structures.

This does not justify the conclusion that the model is inadequate.

It does justify the conclusion that stability and adaptive capacity are distinct attributes.

A company may have an excellent ability to preserve institutional balances and still need continuously to review the speed with which it converts those balances into decisions.

8. Control does not mean decision-making sovereignty

The case also offers an important warning for controlled groups and business families.

Ownership answers the question of who holds particular rights.

Governance answers a different question: how those rights are converted into decisions.

At Volkswagen, the Porsche and Piëch families remain at the top of the control structure. Their holding company owns the majority of the company’s voting rights.

Even so, the restructuring demonstrated that holding the majority of votes does not mean possessing sovereignty over every relevant decision.

There are boards, approval rights, employee representatives, shareholders with specific prerogatives, legal rules and political interests capable of altering, conditioning or preventing particular choices.

This distinction becomes especially important as corporate structures become more sophisticated.

Veto rights can be distributed to protect different family branches.

Qualified majorities can be required to prevent opportunistic decisions.

Boards, committees and reserved matters can be created to reduce concentrations of power.

Each of these mechanisms may be rational in isolation.

But their aggregate effect must be observed.

A structure designed to prevent bad decisions must also remain capable of producing difficult ones.

9. The second stage: portfolio review

Five days after the Future Plan 2030 was approved, the second stage of the restructuring became visible.

On 8 September 2026, Gernot Döllner, Chairman of the Board of Management of Audi, confirmed that Ducati is among approximately 600 of the Group’s roughly 2,000 businesses currently subject to portfolio review. According to him, Volkswagen maintains disciplined and responsible portfolio management, Ducati forms part of that assessment process, and no decision has been taken. (Bloomberg)

The case is illustrative.

Ducati is profitable and has a well-established reputation. It sells around 50,000 units per year and recorded €925 million in revenue and €52 million in operating profit in the latest financial year. Its operating margin, however, remains below the 9% that the Group aims to achieve by 2030. (Bloomberg)

The question is no longer whether the asset is good.

The question becomes whether capital and managerial attention generate a higher return when allocated to the strategic core.

The distinction applies directly to family holding companies that have accumulated assets over generations, often for historical or emotional reasons that have never been subjected to scrutiny.

There is also a second element, one that sits even closer to the argument of this article.

Volkswagen had already considered selling Ducati in 2017. Volkswagen engaged Evercore to assess strategic alternatives for Ducati; five bidders were shortlisted, and binding offers were expected in October of that year. In September, the Supervisory Board halted the process in the face of sustained opposition from employee representatives, who had publicly stated that they would not approve the sale. According to reports at the time, the Porsche and Piëch families did not support the transaction either. (Bloomberg; Reuters)

Portfolio review does not depend solely on financial analysis.

It depends, once again, on the decision-making structure.

10. The real test begins now

Approval of the Future Plan 2030 does not bring Volkswagen’s transformation to an end.

It merely authorises its beginning.

The company intends to reduce its model portfolio by approximately half by 2035, cut the complexity of its offering by around 75%, review one third of its portfolio of shareholdings and businesses, adapt capacity to approximately nine million vehicles per year, and achieve an operating margin of 9% by 2030, with €135 billion allocated to investment and research and development between 2027 and 2031. (Volkswagen Group)

These are extraordinarily ambitious targets for a company whose operating margin was 2.8% in 2025. (Volkswagen Group)

Many decisions will still depend on specific negotiations. The future of the four German plants remains open, and a concept for the European production structure is to be developed by the end of June 2027. Implementation of the workforce reductions will remain subject to agreements with employee representatives. And the new decision-making architecture still has to be developed.

For that reason, perhaps the most important element of the restructuring is not the number of jobs eliminated or models removed from the portfolio.

It is the recognition that, when the competitive environment changes, governance itself may need to be revisited.

Governance structures are normally designed to respond to a legitimate concern: preventing any one person or group from concentrating enough power to compromise the organisation.

The Volkswagen case poses the complementary question.

After distributing the power to prevent, did the structure preserve enough power to decide?

The answer does not lie in the formal design of the organisational chart.

It will emerge from Volkswagen’s ability to execute the transformation that, after weeks of conflict, everyone finally agreed was necessary.

References

VOLKSWAGEN GROUP. The Supervisory Board approves Future Plan 2030: a strong signal for Volkswagen Group. Wolfsburg, 3 September 2026.

VOLKSWAGEN GROUP. Annual Report 2025. Wolfsburg, 2026.

VOLKSWAGEN GROUP. Shareholder Structure. Position as at 31 December 2025.

PORSCHE AUTOMOBIL HOLDING SE. Shareholder Structure. Position as at 31 December 2025.

BLOOMBERG. Volkswagen Considers Sale of Ducati as Part of Portfolio Overhaul. 8 September 2026.

REUTERS. Volkswagen flags 50,000 job cuts across the group as the board approves a turnaround plan. 3 September 2026.

REUTERS. Fear and compromise: How Volkswagen struck a deal over historic job cuts. 4 September 2026.

REUTERS. Can Volkswagen sidestep board opposition to push through its overhaul? 28 August 2026.

REUTERS. Volkswagen supervisory board rejects management restructuring proposal. 10 July 2026.

BLOOMBERG. Volkswagen Withdraws Ducati Sale Amid Unions’ Opposition. 30 September 2017.

REUTERS. Volkswagen labour bosses oppose Ducati, Renk sale. 30 July 2017.

COURT OF JUSTICE OF THE EUROPEAN COMMUNITIES. Commission of the European Communities v Federal Republic of Germany, Case C-112/05, judgement of 23 October 2007.

COURT OF JUSTICE OF THE EUROPEAN UNION. European Commission v Federal Republic of Germany, Case C-95/12, judgement of 22 October 2013.

FEDERAL REPUBLIC OF GERMANY. Gesetz über die Überführung der Anteilsrechte an der Volkswagenwerk Gesellschaft mit beschränkter Haftung in private Hand, 21 July 1960, as amended on 30 July 2009, sections 4(2) and 4(3).