Volkswagen CEO Oliver Blume has warned that mounting pressure on the automotive industry will require further cost reductions as the German carmaker prepares for weeks of negotiations on a restructuring programme.

In an internal memo seen by Reuters, Blume said conditions in the sector were expected to deteriorate further in the coming years, increasing the need for measures to improve Volkswagen’s competitiveness.

The company is undertaking its largest restructuring to date.

Plans could involve as many as 50,000 additional job cuts and the separation of certain business units, although Volkswagen has not formally set a target for job reductions.

The automaker is facing stronger competition from Chinese manufacturers in Europe, declining profitability in China, US import tariffs and excess production capacity across European operations.

Blume said margins below 4% were strong given the current market environment but remained insufficient to fund investment in new technologies, products and facilities over the longer term.

“The situation is more than critical”, Blume said, pointing to Volkswagen’s overhead costs, which he said remained more than 30% higher than those of comparable companies.

Volkswagen’s supervisory board is scheduled to meet on 4 September to continue discussions on the turnaround programme, sources told the publication.

Blume is also expected to visit plants that could be affected by the existing restructuring plan next week.

He said the widely cited figure of around 50,000 potential job reductions globally should not be viewed as a formal target.

Instead, he described it as an indication of the cost savings Volkswagen considers necessary to close the gap with competitors.

In July, Volkswagen said it would reduce its model line-up and further lower production capacity.

Blume said the Emden, Hannover, Zwickau and Neckarsulm plants were unlikely to reach competitive capacity utilisation during the 2030s, while stressing that no plant closures had been decided.

Porsche SE, Volkswagen’s majority shareholder, called earlier this month for swift action to improve the group’s competitiveness after recording billions of euros in impairments linked to its investment.

Volkswagen reported first half 2026 operating profit of €5.93bn ($6.76bn), down 11.6%, while revenue fell 0.2% to €158.10bn.