Volkswagen shares rose 6% on Friday after its board of directors approved sweeping cost cuts aimed at confronting challenges including ferocious Chinese competition and US tariffs.
Investors were cheered by CEO Oliver Blume’s success Thursday in pushing the streamlining effort through the board, where employees are strongly represented.
The plan envisions reducing Volkswagen’s work force by 50,000, phasing out four factories in Germany to eliminate expensive excess production capacity, and slimming the company’s roughly 150 different models to half that.
Perhaps the biggest challenge the company is facing is China, formerly a major source of profits. The overall Chinese market has slumped by more than 20% this year as local competitors launch hundreds of new models amid fierce price competition.
VW has also been hit by higher U.S. tariffs on cars imported from Europe. Volkswagen’s profits fell by 31% in the first half of the year to 3.1 billion euros ($3.6 billion), even though outside of China it sold more cars worldwide than the same period last year.
