If you’re an investor puzzled about the implications of Volkswagen ’s surprise restructuring agreement, one piece of data might help - the shares closed Friday up 6.23%.

The shares had been under pressure in the days leading up to the agreement with investors expecting a typical VW supervisory board outcome; lots of concessions to the union, not much practical progress, and much negativity hidden in the details.

The deal then, announced Thursday evening, was an all-round surprise. The depth and breadth of the changes sought by CEO Oliver Blume – including 100,000 job losses, the closure of four factories, the slashing and simplification of the model range, sharply lower capital spending – was thought to be just too much for the union to take, despite general acceptance that VW’s predicament was existential.

Volkswagen certainly is in an unprecedentedly weak position. Its success as Europe’s biggest automaker – its output spans mass market giants like Skoda, SEAT/Cupra and its own brand, upmarket performers like Audi and Porsche and ultimate names like Bentley and Lamborghini.

VW’s prosperity was 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.

Before the news of an agreement, the likelihood of a deal was said to be akin to “Mission Impossible” and similar cliches.

Investment researcher Bernstein said most media reporting and its own sources had pointed to massive and potentially unbridgeable gaps between the positions on the one side of the Executive Board, strongly backed by majority shareholder Porsche SE.

VW has clung to a 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 Lower Saxony state politicians, where VW is domiciled.

“(Porsche SE was) demanding deep restructuring and cost cuts, and those on the other side of the Works Council and the State of Lower Saxony were reluctant to make further concessions beyond those that had been agreed back in December 2024. Indeed, it was being openly speculated in the media that the Executive Board might take the unprecedented step of bypassing the Supervisory Board and appealing directly to VW shareholders through an emergency general meeting. There it was thought it might achieve the 75% majority vote to push through its measures,” Bernstein said in a report.

The agreement included a phasing out of models to be produced at four plants, but closure wasn’t included. Plans to separate VW auto-making and the components business sedan weren’t discussed.

Reuters Breakingviews said some of the details might get in the way of Blume’s plans.

“Despite pledging to slash jobs, Blume has not yet given much detail on how he will reach the 9% operating margin by 2030 (versus 2.8% in 2025). And his numbers rely on the assumption that VW will be able to keep selling the same 9 million vehicles every year. That may be hard given Chinese automakers doubled their share of new European car sales to 15% in the first six months of the year,” Breakingviews columnist Aimee Donnellan said.

Donnellan said much of the pain has been put off because VW has promised no mandatory redundancies until 2030.

“It has not even agreed to shut its least efficient German plans, but simply said it cannot yet commit to using them beyond 2031,” Donnellan said.

Blume may be forced to sell VW’s 85% stake in truck maker Traton , its 75% stake in Porsche or seek a buyer for Lamborghini to fund the changes, according to Donnellan.

Investment bank UBS was enthusiastic.

“The deal is outright positive because management got all major items approved, and it is good that it came quicker than expected,” UBS said in a report.

“We rather see the deal as an essential package to safeguard current profitability against intensifying top-line pressures from Chinese competition in Europe. Should there be more protectionism in upcoming EU regulation (PHEV tariffs, Industrial Accelerator Act, CO2), this could even open up an opportunity for margin recovery, but it feels premature to give the benefit of the doubt,” UBS said.

Streamlining VW governance

Breakingviews’ Donnellan spotted an attempt to finally streamline VW’s tortuous governance arrangements.

“Part of Thursday’s announcement is a plan to streamline the German group’s governance to reduce the number of decisions that require sign-off from the supervisory board. This could make it easier for Volkswagen management to push through cuts or cull more models that the 50% he has already earmarked,” Donnellan said.