en.Wedoany.com Reported - The Volkswagen Group is advancing its global restructuring, cutting capacity and costs in Europe to address a structural crisis, while its Mexican manufacturing operations continue to expand production, exports, and investment, becoming an increasingly important manufacturing hub for the North American market.
One of Volkswagen's competitive challenges in Europe is that its costs are 20% higher than those of international competitors. CEO Oliver Blume has warned employees that the company could theoretically cut another 50,000 jobs worldwide, bringing the total number of layoffs to 100,000. The group plans to reduce its product portfolio by up to 50%, structural complexity by 75%, and global manufacturing capacity to approximately 9 million vehicles per year to cope with rising costs, stricter regulations, changing trade policies, and competition from Chinese electric vehicle manufacturers. In an internal memo, Blume stated the need to bring fixed costs to a competitive level, noting that about half of the group's fixed expenses are related to labor costs. At the Wolfsburg headquarters, management faces strong resistance from labor representatives, with union members blocking a restructuring proposal that could have closed four German production sites, including those in Hanover, Emden, Zwickau, and Audi's plant in Neckarsulm. Due to protections under the "Volkswagen Law," plant closures require a two-thirds majority vote, but factories in Zwickau and Neckarsulm are not protected by this law. Any closure measures could face strong opposition from the IG Metall union, which has organized demonstrations to defend domestic manufacturing capabilities. Other restructuring options under consideration include phasing out underutilized plants, relocating production of models destined for the Chinese market back to Germany, or converting idle factories for defense manufacturers. The financial cost of directly closing plants is enormous; for example, Audi's closure of the Brussels plant in 2025 affected approximately 3,000 employees, resulting in restructuring costs and provisions of around $1.8 billion.
In contrast to the contraction in Europe, Volkswagen's manufacturing operations in Mexico are expanding, including the Volkswagen assembly plant in Puebla, the Audi Mexico plant in San José Chiapa, and the Volkswagen engine plant in Silao, Guanajuato. In the first half of 2026, Volkswagen Mexico produced 198,297 vehicles, a year-on-year increase of 24.5%; exports grew even faster, reaching 161,816 units, an increase of 37.4%. The Puebla assembly plant currently produces the Jetta, long-wheelbase Tiguan, and Taos crossover. The Silao engine plant supplies EA211 engines and third-generation EA888 powertrains to the regional production network. Capacity expansion is supported by capital investment. In January 2025, Volkswagen inaugurated a new N-103 paint shop in Puebla, with a construction period of 24 months and an investment of approximately $763.5 million. This fully electric facility does not use natural gas, reduces paint energy consumption per vehicle by 22%, and can process up to 90 bodies per hour. Holger Nestler, President and CEO of Volkswagen Mexico, stated that the new paint shop represents an important step forward in the subsidiary's and the group's global sustainability strategy.
Starting in 2027, the Puebla plant will become the exclusive global production base for the next-generation Volkswagen Golf hybrid model. This decision supplements a previously announced $942 million investment plan aimed at establishing the site as one of Volkswagen's key production bases for electric mobility. Meanwhile, Audi Mexico is completing a previously announced €1 billion (approximately $1.08 billion) investment plan, focusing on preparing production infrastructure for electric mobility. Supported by demand for the Audi Q5, production at the San José Chiapa plant increased by 6.7% year-on-year in the first half of 2026, reaching 69,138 units, while exports grew by 13.4% to 67,583 units. To support higher production volumes, Audi Mexico plans to add approximately 800 jobs in 2026.
