For decades, Volkswagen defied the logic that leading global corporations had to be cutthroat capitalists to survive and thrive. Instead of being driven by shareholders’ demands, VW managed to stay at the top of the global auto rat race while strategy was determined by trade unions and socialist politicians.

Those days of the workers coming before shareholders appear to be coming to an end, with the coup de grace coming ironically from the communist Chinese, whose automakers are trampling over their former western masters on the back of government subsidies and state direction.

Volkswagen has managed to continue with its singular corporate governance structure since the Second World War. The supervisory board has ultimate power with unions holding half of the 20 seats, and two of the rest held usually by left-leaning Lower Saxony state politicians, where VW is domiciled. Now the massive crisis facing the company calls for unprecedented action.

The board has always succumbed to traditional pressures, but according to Reuters, if the meeting on September 4 rejects the controversial restructuring plan which includes 100,000 job losses and possibly 4 factory closures, management could call an extraordinary shareholder meeting in October to bypass the union and the politicians’ veto. Reuters quoted “people familiar with the matter”.

General shareholders meeting could be crucial

Reuters said at a general shareholders meeting, unions have no vote, and Lower Saxony controls 20%. The remaining 80% is controlled by the Porsche and Piech families (53.3%), Qatar 17% and other shareholders 9.7%.

“That could leave VW within reach of a 75% majority usually needed for big structural decisions at listed companies in Germany, potentially breaking the impasse of continued resistance on the supervisory board,” according to Reuters.

Volkswagen’s prosperity was recently based on two pillars – huge profits earned in China, and the highly successful German base where its engineers led the world for decades in making and exporting advanced sedans and SUVs. Chinese mega profits have almost been wiped out while production in Germany has become uneconomic. Lower-margin electric vehicles, better-quality and cheaper Chinese EVs, booming power prices and U.S. tariffs haven’t helped.

Paul Bennett, Managing Partner at Madox Square LLP , said extraordinary Chinese profits financed a generation of European overcapacity. Other big European manufacturers will have similar problems.

Chinese earnings have collapsed

“Chinese joint-venture earnings have not shrunk, they have collapsed. Volkswagen’s China JV profit alone is forecast to fall from near €1 billion ($1.2 billion) to as little as €200 million ($230 million) in a single year, with deliveries down more than a third in one quarter,” Bennett said in an email exchange.

“If nothing else changes, the unwind doesn’t arrive as a single crisis; it happens plant by plant and model line by model line, concentrated in Germany, over several budget cycles rather than one dramatic year. By 2030, the manufacturers most exposed are the ones still carrying bloated, undifferentiated model ranges into a market where Chinese entrants iterate faster and cheaper, and whose governance still lets internal veto points block restructuring,” Bennett said.

Paul Howard Surridge, Chairman of BIHIMA.com , agreed that VW’s problem is an alarm sounding across European manufacturing.

“VW generated €158.1 billion ($183 billion) in revenue during the first half of 2026, yet its operating profit fell to €5.9 billion ($6.8 billion), a margin of just 3.8%. That is not imminent collapse, but it leaves dangerously little room to fund new models, software, batteries and factory modernization,” he said in a LinkedIn post.

Investment bank UBS agreed that VW capacity and headcount cuts are required to safeguard its profits as Chinese competition strengthens.

Action required to avoid margin erosion

“Not as a means to reach the 8-10% group operating profit margin target by 2030, about twice current profitability, but rather to avoid further erosion of margins,” UBS said in a report.

Bennett, who is also Senior Advisor at Genpact Banking and Capital Markets, said big changes to VW’s governance might finally be possible.

“What’s different now is that the cushion has been removed by the market, not by a boardroom decision. That is new, and it is not a paper argument about efficiency, it is cash disappearing in real time,” Bennett said, commenting before the Reuters report on the possibility of a general shareholders meeting.

“Management and the workforce reportedly now agree on the arithmetic itself, another 50,000 job reductions on top of 50,000 already agreed, and a willingness to halve a 150-model line-up, which marks a real shift: the disagreement has moved from "is this needed" to "can a 1960s governance structure execute it."

“The proposal to separate passenger cars from components, specifically to route around the Volkswagen constraints on plant closures, is the tell. Previous "normal company" efforts tried to change behaviour within the existing structure; this one is testing whether the structure itself has to change. That is a genuinely different mechanism, even if the destination looks familiar, and it is why I would be more cautious than usual about betting against this attempt,” Bennett said.