Volkswagen Group has sharply reduced its operating-margin forecast and warned that its business is facing profound, lasting market changes. The group now expects an operating margin of just 1%, down from an earlier forecast of 4%, while a sweeping cost-cutting plan could reshape its brands, factories and workforce.

VW finance chief Arno Antlitz told Bloomberg that “the market changes are profound and lasting” and that “we have no time to lose.” The warning comes as weaker demand in China, higher energy costs and the rapid expansion of Chinese automakers put pressure on the German group’s results.

Volkswagen Group faces a smaller future

The restructuring could eventually eliminate up to 100,000 jobs across Volkswagen Group brands, according to the report. A gradual phase-out of the SEAT brand is also officially under consideration, although no final decision has been made.

Volkswagen is planning to simplify its product and engineering operations as it tries to reduce costs. The group wants to cut component variety by as much as 75% on next-generation vehicles and reduce the number of available models by up to 50%. The long-running Touareg is already slated to disappear.

Those changes could also affect the company’s production network. Volkswagen’s Emden, Zwickau and Hanover plants, along with Audi’s Neckarsulm facility, currently have no new models allocated beyond their present-generation vehicles. Their future roles have not been finalized. The Osnabrück plant, which builds the T-Roc Convertible, is set to become a competence center for security and defense solutions.

Porsche job cuts reportedly under review

Porsche could face another round of job reductions. Handelsblatt reports that the sports-car maker is considering 4,100 additional cuts on top of 8,900 layoffs already agreed. Neither Porsche nor Volkswagen Group commented on the reported additional reductions.

If implemented, the additional cuts would represent roughly one in five Porsche jobs by 2035. The report adds another layer of pressure to a group already reassessing its brands, plants and model lineup.

EV growth has not solved the profitability gap

Volkswagen’s electric-vehicle sales are increasing, helped by newer models such as the ID. Polo. However, EVs remain significantly less profitable than combustion-engine vehicles, creating a difficult transition as European Union policy continues to push automakers toward zero-emission cars.

At the same time, Chinese automakers are gaining ground in China and other international markets. That competition is hitting Volkswagen in a region that has long been central to its global business, while energy and operating costs remain elevated.

Volkswagen Group is also reviewing the future of its wider holdings. Bloomberg reports that Ducati could be put up for sale, following Bugatti’s departure from the group’s corporate umbrella. Together with the possible SEAT phase-out, plant uncertainty and large-scale job reductions, the measures point to a significantly smaller and less complex Volkswagen Group.