Volkswagen Faces an €11 Billion Shortfall as Group Prepares for Painful Cuts
Germany’s automotive giant Volkswagen may be heading towards an €11 billion financial gap in 2026, according to multiple reports. The looming deficit is forcing the company into a major cost-cutting drive that could include investment freezes, job reductions, and the sale of some of its subsidiaries.
Volkswagen’s board has already begun a new austerity cycle aimed at stabilising its shrinking cash flow and curbing a surge in borrowing costs. Insiders say funding for development projects is being reduced, factory modernisations delayed, and non-core businesses considered for divestment.
Among potential sale candidates are engine manufacturer Everllence (formerly MAN Energy), engineering firm IAV, and the renowned design studio ItalDesign. The latter’s sale had been rumoured earlier this year, but the plan now appears to be moving closer to reality.
Analysts warn that sustained financial pressure could lead to a credit rating downgrade, making borrowing more expensive and further eroding Volkswagen’s financial flexibility. The vicious cycle of higher debt costs and reduced liquidity could, they say, deepen the crisis unless drastic measures are taken soon.
Leadership Under Strain
The financial turmoil has already reshaped Volkswagen’s top management. Group CEO Oliver Blume, who previously held a dual role as head of Porsche, has stepped back from day-to-day leadership of the sports car brand to focus entirely on steering Volkswagen through the crisis. Porsche is now led by Michael Leiters, former CEO at McLaren and Ferrari, tasked with safeguarding the brand’s profitability and insulating it from the wider group’s struggles.
A Wider Industry Reckoning
Volkswagen’s troubles reflect a broader reckoning across the German car industry. Electrification costs are rising, the Chinese market is shrinking, and competition from Chinese EV manufacturers is intensifying. At the same time, tougher European emissions regulations are straining traditional business models that once guaranteed steady profits.
Whether Volkswagen can navigate this storm as successfully as it emerged from Dieselgate remains to be seen. But an €11 billion hole is impossible to ignore: a gap large enough to shake the very foundations of German industry.
