Volkswagen's Crossroads: Can Leadership Shakeups Sustain the Restructuring Revolution?

As Volkswagen embarks on one of the most ambitious restructurings in automotive history—a $30 billion overhaul to shift from combustion engines to electric vehicles (EVs) and cut 20,000 jobs by 2030—the sudden exit of Gunnar Kilian, its longtime human resources chief, has injected uncertainty into a plan already strained by union tensions and rising competition from Chinese automakers.

The departure of Kilian, who led negotiations to avoid mass plant closures and spearheaded the voluntary workforce reduction strategy, raises critical questions: Can Volkswagen maintain its operational efficiency gains without a key architect of its restructuring? And does this leadership vacuum amplify risks to its cost-saving targets and EV transition timeline?

Leadership Risks in the Spotlight

Kilian's exit, announced in June 2025, followed a clash over governance of Volkswagen's sprawling holding company structure. His role as the bridge between management and labor unions was pivotal. Under his leadership, Volkswagen avoided forced layoffs by securing voluntary departures from over 20,000 workers—a feat that now hinges on his successor, Thomas Schäfer, balancing aggressive restructuring with social stability.

The stakes are high. Volkswagen aims to slash annual labor costs by €1.5 billion by 2030, but its first-quarter 2025 earnings dropped 40% due to weak EV demand in German markets and rising production costs. With Kilian's exit, the company risks delays in finalizing union agreements for further workforce reductions, particularly as unions like IG Metall threaten strikes over plant closures and apprenticeship cuts.

Operational Efficiency: Progress or Stagnation?

Volkswagen's restructuring has made measurable progress: German production capacity is set to shrink by 734,000 units by 2030, and its Wolfsburg plant will transition to EV production by 2027. Yet, the plan faces headwinds.

1. Competitive Pressures: Chinese automakers like BYD and NIO are undercutting Volkswagen's EV pricing by 20-30%, forcing the German giant to accelerate cost cuts. The company's Q1 2025 earnings miss highlights its struggle to balance innovation with profitability.
2. Execution Credibility: Analysts criticize Volkswagen's “bloated governance structure,” which slows decision-making. A McKinsey report notes that VW's profit margins (3.2% in 2024) lag peers like Toyota (7.8%) and Stellantis (7.2%). Without Kilian's union-relations expertise, further delays could erode investor confidence.

Investment Implications: Proceed with Caution

Volkswagen's shares have held steady at €215, up 7% year-to-date, but the stock's resilience may be short-lived. Key risks include:
- Leadership Vacuum: Schäfer's dual role as interim HR chief and head of passenger cars could dilute focus on restructuring.
- Union Pushback: Plans to cut apprenticeships by 57% (from 1,400 to 600 annually) may trigger strikes, disrupting production.
- EV Demand Uncertainty: Volkswagen's goal to double EV sales by 2025 faces headwinds as European consumers shift to cheaper Chinese alternatives.

Investment Thesis:
Volkswagen's long-term prospects hinge on two variables: executing its workforce plan without union disruption and outpacing Chinese competitors on cost and scale. While the company's EV lineup—bolstered by its $50 billion U.S. investment in battery gigafactories—is promising, the near-term risks of leadership instability and margin compression warrant caution.

For investors, a wait-and-see approach is prudent. A pullback below €200 could present a buying opportunity if Volkswagen:
1. Finalizes union agreements by mid-2026.
2. Reports sequential margin improvements in Q4 2025.
3. Announces partnerships with Asian suppliers to counter Chinese cost advantages.

Until then, Volkswagen remains a “high-risk, high-reward” bet—a stock to own if you believe its structural overhaul will succeed, but one to avoid if leadership missteps and union conflicts escalate.

In the automotive industry's grueling race to electrify, Volkswagen's fate now lies in its ability to turn a leadership shakeup into a catalyst for discipline—not a distraction from its already ambitious goals.