VW's make-or-break week — for the German parent and its Eastern Cape operation

Bloomberg Opinion's Chris Bryant lays out the stakes as Volkswagen's supervisory board confronts Chinese competition, a battered share price and pressure to shut German plants. The Porsche and Piech families, who control half of VW's voting shares, have watched their investment implode to a fraction of what they paid for their stake in 2022. For South Africa, this isn't just a European boardroom drama — VW's Kariega plant in the Eastern Cape is one of the group's oldest manufacturing sites outside Germany, and any radical restructuring or brand spin-offs (Audi, Lamborghini) could reshape investment priorities across its global production network, SA included. .By Chris Bryant.Volkswagen AG has seen plenty of corporate drama over the years but Thursday’s meeting of its supervisory board may top past episodes: Tens of thousands of jobs, four German factories and the group’s unwieldy corporate structure are all on the line as managers try to counteract rising Chinese competition. It’s a defining moment, too, for the Porsche and Piech families, who control half of VW’s voting shares as well as a minority stake in sports car maker Porsche AG, their pride and joy. While hardly impoverished, they’ve suffered a massive hit to their wealth lately. So have other VW shareholders. By backing a comprehensive restructuring and spinning off assets, VW could yet turn things around. But it likely won’t happen without a fight. .To be clear, I’ve no desire for anyone at VW to lose their job, particularly with the far-right Alternative for Germany looking to gain political capital from the country’s industrial malaise. And yet Germany’s largest automaker is battling fires wherever it looks. The once booming Chinese market has become a bloodbath, competition in Europe is intensifying and auto shipments to the US are subject to higher tariffs. VW’s operating profit fell by more than half last year and its shares are close to a 16-year low. Meanwhile, Porsche is worth a fraction of what the families paid for their stake in 2022. In the past, shareholder value often seemed a secondary consideration at VW. The group sank billions into costly efforts to manufacture batteries and develop software in-house and forwent the stock buybacks favored by some of its rivals.With worker representatives occupying half of VW’s supervisory board seats, and the state of Lower Saxony holding a couple — along with 20% of the company’s voting shares — getting the votes for cost-cutting isn’t easy. Nearly 30,000 employees have already agreed to depart voluntarily and VW has made some progress trimming overheads. Yet to keep the peace, it’s shied away from compulsory layoffs and closing German factories. More than 40% of its roughly 650,000 workers are in Germany where labor costs are comparatively high. The situation isn’t as dire as 2008-2009, when Porsche almost bankrupted itself trying to acquire the much larger VW. In the end, VW turned the tables and acquired Porsche’s car-making unit instead, preserving the Porsche and Piech families’ influence and wealth..Nevertheless, the clans rely on dividends from VW and Porsche to pay down €5 billion ($5.7 billion) of net indebtedness at their listed holding company, the confusingly named Porsche Automobil Holding SE. Those dividend inflows have declined, slowing its deleveraging and curtailing its own cash distributions. (While the holding company is trying to diversify, its main investments are in VW and Porsche AG, where it respectively controls 31.9% and 12.5% of the share capital.) Porsche SE has ample liquidity and doesn’t face near-term refinancing pressures. Still, its market capitalization has slumped to just €8.7 billion, whereas five years ago it was more than €30 billion. That’s grim for the families who own half the holding company’s share capital. Porsche SE and Porsche AG have both been relegated from Germany’s bluechip Dax index..One would think these financial setbacks would add impetus for change. But this is VW — nothing is straightforward. Labor leaders have vowed to resist plant closures “with all our might. And yet by spinning off the mass-market VW brand, management may be able to circumvent the ability of worker representatives and Lower Saxony to block major decisions.The fraught situation has made investors even more wary: VW’s market capitalization has shrunk to just €38 billion, a derisory level for a group with more than €320 billion in yearly revenue. Toyota Motor Corp., with which VW once vied for the crown of world’s largest automaker, is worth €229 billion. Doubts about VW’s governance and its willingness to transform itself have long caused the group to trade at discount to the sum of its parts. But considering that VW’s 75% stake in Porsche is worth around €31 billion, while its majority stake in truck maker Traton SE is valued at almost €15 billion, the current valuation implies the remainder of the sprawling conglomerate — which includes brands such as Lamborghini and Audi — is effectively worthless.That seems far too harsh. Not only is VW now preparing to take further action on costs, but its latest EVs, some developed with the assistance of Chinese partners, are hugely improved compared with initial efforts.And VW isn’t in such a bad position financially: Its automotive unit holds around €34 billion of net cash. Its recent sale of a majority stake in marine-engine unit Everllence SE to Bain Capital will boost its coffers by another €7 billion or so. .Read more:.Could China help make Africa a factory for the world?.Of course, a chunk of that money will likely be needed to fund restructuring. Still, the Everllence sale highlights the potential to unlock value, if only VW would try a bit harder.With executives reportedly looking to transform VW into more of a holding company for its various brands, perhaps that moment has finally arrived. I’ve talked before about the attractions of highly profitable Lamborghini, which Bloomberg Intelligence analyst Michael Dean thinks might be worth €25 billion if spun out. VW’s premium Audi unit would also be a strong candidate for an initial public offering.A more financially resilient and valuable VW benefits everyone, including its remaining workers. The group’s billionaire owners shouldn’t let this opportunity slip by..© 2026 Bloomberg L.P..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.

VW's make-or-break week — for the German parent and its Eastern Cape operation

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