Volkswagen shares rose by 1.5% after the Frankfurt Stock Exchange opened on Friday, a modest gain that does little to offset a decline of about 30% since the start of the year. The muted reaction stands in contrast to the DAX index of Germany's 40 largest companies, which rose by about 2.5% over the same period.
The share price movement points to a gap between what Volkswagen has offered and what investors were hoping for. Analysts had priced in a bolder plan, including a larger round of job cuts beyond the proposed 100,000 and the closure of at least some German plants. That such a step remains off the table is itself telling: in a corporate history stretching back to the 1930s, Volkswagen has never closed one of its own plants on home soil.
Where the Cuts Could Fall
For now, Volkswagen's strategy for reassuring investors rests on a drastic streamlining of its lineup of as many as 150 models, with production narrowed to focus solely on the most profitable segments. The absence of a timeline, however, is a significant gap: the company has not yet specified when the plan will be implemented or which models and brands will be affected.
That uncertainty extends to the Volkswagen Group's broader brand portfolio. It remains unclear whether the streamlining will also touch Skoda, which sits alongside SEAT, Porsche, Audi, Lamborghini and others under the group umbrella.
Skoda, however, may have less to fear than most. Models such as the Octavia, Kodiaq and Superb rank among the most profitable mass-produced vehicles in the entire group, a track record that could shield the Mlada Boleslav-based automaker from the scale of cuts facing less profitable divisions.
The picture looks far less favorable elsewhere in the group. SEAT's vehicle production, VW's commercial vehicle division and Volkswagen's software arm, CARIAD, all suffer from weak profitability. Lamborghini, by contrast, reports the highest margin in the entire group, though its position owes much to a business model that was never built for mass production.
Divesting Lamborghini would align with Volkswagen's restructuring logic, and this is a step the company may ultimately be unable to avoid. The electric vehicle lineup presents a more urgent problem still, with models such as the VW ID.3, ID.4 and ID.5 among the most troubled in the group, some reportedly operating at a loss.
Structural Problems, Half Measures
It is not only the pace of cost-cutting that appears insufficiently decisive, but the vagueness surrounding key questions, including brand strategy and the future of loss-making models, that is keeping investors skeptical about Volkswagen's prospects.
Volkswagen has long been weighed down by high labor costs, the strong influence of unions, a lack of strategic focus, a critical loss of competitiveness in the key Chinese market, and insufficient innovation in electromobility and related software, a combination of structural pressures that the current streamlining plan barely begins to address.
Regaining investor confidence will likely require far more drastic measures than those announced so far. Chief among them is a workforce reduction of at least several tens of thousands, alongside the closure of some German plants that are already running below capacity, a step made increasingly difficult to postpone by demand that remains persistently weaker than it was over the past decade.
Full version of this abridged text was originally published on the author's personal website lukaskovanda.cz.