This article first appeared on GuruFocus .
Volkswagen ( VWAGY ) CEO Oliver Blume is warning that the automaker's restructuring effort is far from finished, with labor costs at some German factories still running well above competing European plants. The comments sharpen the risk around Volkswagen's turnaround because further savings could eventually mean deeper workforce reductions, production changes or even plant closures if management cannot bring costs down fast enough.
Volkswagen is Europe's largest automaker by sales, with brands including Volkswagen, Audi, Porsche, Skoda and Seat. Its earnings depend heavily on vehicle volumes, pricing, manufacturing efficiency and increasingly its ability to compete profitably in electric vehicles.
This journey is not over, Blume said during a visit to Volkswagen's Emden plant in Germany.
The cost gap he highlighted is significant. Labor expenses at Emden are more than twice those at comparable European sites, while other Volkswagen plants also operate at substantially lower costs.
That matters because Emden, an electric-vehicle production hub, is one of four Volkswagen factories without a confirmed business plan beyond 2030. The plant could ultimately face closure if its economics do not improve, although Blume said shutdowns would remain a costly last resort.
Management is instead considering alternatives including partnerships, outside investors and new industrial projects that could preserve activity and jobs at underutilized sites.
For investors, the tension is clear. Lower factory costs could improve margins and make Volkswagen more competitive against both European rivals and lower-cost Chinese EV manufacturers. But achieving those savings could require politically and operationally difficult restructuring.
Volkswagen shares traded about 2% lower Wednesday.
Investor Takeaway
Investors should watch labor-cost reductions, factory utilization and any decisions on plants lacking post-2030 plans. The most important test is whether Volkswagen can narrow its manufacturing-cost disadvantage without triggering expensive shutdowns or prolonged labor disputes. Better productivity and lower fixed costs would strengthen the margin-recovery case, while continued underutilization could force more aggressive restructuring. Emden is becoming an important signal for the wider turnaround: if Volkswagen cannot make one of its major EV plants competitive, investors may question how quickly the group can improve returns across its broader European manufacturing network.
