Volkswagen Is Germany’s Warning | Armstrong Economics

I have been saying for years that Germany was committing economic suicide. People thought Germany’s manufacturing base was untouchable. They believed German engineering alone would overcome every political mistake. That was always nonsense. No company, no matter how great, can survive if politicians deliberately make it impossible to produce competitively.

Now even Volkswagen is admitting reality. Reuters reports the company is considering cutting up to 100,000 jobs over the coming years while closing factories, reducing investment, and restructuring parts of the business. This comes after tens of thousands of positions had already been targeted. When the largest industrial company in Germany starts talking about survival instead of expansion, you know something is fundamentally wrong.

Politicians will blame China, while others will blame Donald Trump or tariffs. They always need someone else to blame because admitting failure would mean admitting their own policies destroyed German industry.

Germany shut down nuclear power. Energy prices exploded. Brussels piled regulation upon regulation onto manufacturers while demanding impossible climate targets. Then governments forced companies to pour billions into electric vehicles long before consumers were ready to buy them. China developed far superior EVs at lower prices, leading the US and EU to all but ban them. The cost of living crisis has prohibited most from purchasing new cars for that matter. The average German, a citizen of the EU economic powerhouse, now has a lower net worth than some of the Southern European nations.

Volkswagen Group delivered 8.98 million vehicles globally in 2025, essentially flat from the previous year, but appearances can be deceiving. Operating profit collapsed by more than 53%, falling from €19.1 billion to just €8.9 billion, even though revenue held steady at roughly €322 billion. Sales in China and North America continued to weaken while tariffs, restructuring costs, and shrinking margins took their toll. Then the first quarter of 2026 brought another warning, global deliveries fell another 4%, including a 15% decline in China and a 20.5% drop in the United States. This is exactly what happens when costs continue rising while demand weakens. You can keep selling cars, but eventually the profits disappear, and once that happens, the layoffs always follow.

Volkswagen once dominated China and was the crown jewel of Germany, the nation that happened to be the economic powerhouse of the EU. Germany surrendered the very advantage that made it successful, reliable and affordable energy combined with world-class manufacturing. Once you destroy that formula, rebuilding it is not as simple as reopening a factory. China has even bid to buy the shutdown VW factories within Germany. The situation is bleak at best.

The unions will object to every layoff and politicians will promise another rescue package. Perhaps they will condemn Chinese imports a bit more. None of that changes the underlying problem and governments cannot regulate prosperity into existence. They can only spend borrowed money pretending they have solved the crisis.

Volkswagen is collapsing because politicians forgot how economies actually function. Germany was once the economic locomotive pulling Europe forward. Now it has become the example I point to when explaining what happens after years of central planning, climate hysteria, and bureaucrats who believe they know better than markets. Our computer has been warning that Europe faces a prolonged economic decline while capital continues seeking safety elsewhere. Volkswagen is simply confirming what the cycles have been projecting for years that points at a downtrend not only in Germany but in the EU as a whole.