(Nov 11): Volkswagen AG is scrapping a major advanced-manufacturing project at its sprawling headquarter as falling profits force Europe’s biggest carmaker to rethink investment across its German factories.

Volkswagen won’t implement its so-called Gamechanger manufacturing concept “in the form previously planned” in Wolfsburg because of the company’s strained finances, it said on Wednesday. Work will continue on its next-generation electric platform and models including the ID. Roc, a planned electric sport utility vehicle.

The retreat shows how quickly Volkswagen’s financial squeeze is spilling into long-term investment decisions. Earnings have deteriorated across the group, with China turning from a major profit engine into a drag and management now pushing for about €31 billion (US$34.52 billion or RM140.49 billion) in savings while still funding new electric cars, software and factories.

The new technology was intended to introduce new manufacturing techniques at Wolfsburg that could later be deployed more widely across the group. 

Among them was so-called gigacasting, which uses enormous presses to make large sections of a vehicle body in fewer pieces, reducing the number of components and manufacturing steps. Tesla Inc. helped pioneer the method in modern car production and uses large aluminum casting machines at its Grünheide factory near Berlin.

Volkswagen’s powerful works council chief Daniela Cavallo called the decision a ‘flagrant breach’ of a December 2024 agreement and accused the company of giving up its ambition to lead in manufacturing technology.

Cavallo added labour would resist moving production of the combustion-engine Golf from Wolfsburg to Mexico until Volkswagen explains what the change means for jobs and factory volumes. 

Production of the top-selling model is due to move to Mexico next year to make room for future electric models, under a plan labour representatives agreed to in the 2024 pact.

Under Germany’s system of co-determination, worker representatives hold half the seats on Volkswagen’s supervisory board and wield significant influence over major restructuring decisions.

The dispute adds another complication to Volkswagen’s effort to shrink its high-cost German operations. Volkswagen is targeting roughly 100,000 job cuts worldwide as it shrinks capacity and lowers costs, with its retrenchment now reaching deep into Germany. 

The carmaker has also raised the prospect of closing German factories, a step it has avoided throughout the postwar era.

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