In Wolfsburg, big dreams have always been part of the culture, along with a „Mia san mia“ attitude more typically associated with FC Bayern's approach to football.

It’s no surprise. Volkswagen is deeply rooted in Lower Saxony, with six of its ten German plants located there, and about half of its German workforce based at the Wolfsburg headquarters. Yet, the executive leadership over the past decades has often hailed from southern Germany, or was shaped by its influence – starting with Austrian Ferdinand Piëch in 1993, who came to VW’s helm from Porsche and Audi. His successors continued this trend: Bernd Pischetsrieder from BMW, Martin Winterkorn from Audi, Matthias Müller from Porsche, former BMW manager Herbert Diess, and now another Porsche leader, Oliver Blume. Blume, at least, is originally from Braunschweig, making him a true northerner.

But the true common thread isn't so much the southern roots as the orientation towards the premium segment of the automotive industry. Volkswagen, one of the world’s largest automakers, is positioned as a volume brand. Yet, to reach the top, VW’s leaders have preferred gaining their credentials at high-margin luxury brands. While Blume's predecessors managed both VW's passenger car brand and the broader business, he has chosen to continue leading Porsche – a publicly traded sports car manufacturer now – in parallel to VW.

Blume’s insistence that his dual roles are perfectly compatible is proving to be wishful thinking in the face of the crisis. His decision, rooted in his Porsche experience, to enhance the value and thus the price of VW models isn’t yielding the desired results. In a weakening volume market, higher prices are difficult to sustain. This year, VW’s passenger car division sold roughly 3.4 million vehicles in the first nine months – around 80,000 fewer than in the same period last year. To be fair, the decline in deliveries began before Blume’s tenure, with annual deliveries fluctuating between 4.6 and 4.9 million since 2021, down from over 6 million consistently before the Covid-19 pandemic. VW Brand Chief Thomas Schäfer’s reference to a structural cost problem is partly a consequence of the core brand now selling over a million fewer vehicles annually than in the past.

As long as the booming Chinese market could subsidise the home market, everyone went along with it. The alternative would have been confronting their own mistakes – a task that, traditionally, neither the government, unions, nor management in Wolfsburg were interested in. Politicians would have had to admit that their usual bargaining over model allocations to domestic plants was gradually undermining the company’s efficiency. Unions would have had to acknowledge that they were negotiating privileges for workers in Germany at the expense of lower-paid colleagues in other countries. Meanwhile, management could always rely on these parties to deflect blame when operational issues went wrong.

Now, the only way forward is for VW to end this unhealthy alliance among these three forces. The key to this lies with Lower Saxony. For VW to survive the current crisis, it must become less politically entangled. An initial step would be relinquishing seats on the supervisory board, followed by divesting shares and amending the VW law. The Wolfsburg bubble has caused the crisis to be recognised and addressed far too late. It's time to burst it.