Volkswagen has taken some big hits to the chin recently as the German auto giant struggles with shrinking sales margins and an EV rollout that has not gone as smoothly as Volkswagen hoped. The company also slashed jobs, but VW CEO Oliver Blume has now confirmed that things at VW are more dire and critical than first anticipated.

The biggest cuts yet are coming

Blume’s warning came in a recently sent memo to employees, which was picked up by the folks at Reuters. In that memo, he called the situation the company was in “more critical” and said its existing 4% sales margins were by no means sufficient to generate enough funds in the long term for new technologies, new products, and our sites.”

Blume also revealed the company’s 30% overhead cost to build vehicles was much higher than many of its rivals. With these costs continuing to grow unchecked, the company is being forced to cut even more jobs. It already cut 50,000 of them in June, but VW could trim another 50,000 employees to stabilize costs and bring them back under control.

Job cuts could signal more factory closures

With VW cutting employees, these job cuts could also create more shuttered factories. Some of these cuts were already agreed upon in a recent agreement VW struck with the VW Works Council that saw older workers take early retirements and buyouts, while other workers will use their pay raises to support the changes VW is undertaking.

The reported new wave of cuts on top of these existing ones could indicate Volkswagen is deeper in the financial trenches than first thought and that more drastic changes could be coming soon. In the memo, Blume said that four of its German plants won’t be competitive until the 2030s, but that he has not yet decided to close any of them. Some of these plants did make improvements to their cost structure, but Blume said even those changes were not enough.

Some of these changes will also reportedly come in the form of lineup cuts, with the company poised to cut half of its global vehicle lineup over the next few years as Volkswagen expands its focus onto segments that can generate it quicker profits like CUVs and SUVs.

Volkswagen’s troubles started years ago

The proverbial seeds of Volkswagen’s current troubles were planted back in 2015 when it was caught using cheat devices to alter the emissions data of its diesel-powered vehicles. The company paid billions in fines and repair costs to service these vehicles before choosing to go all-in on a gambit to recoup those losses with EV offerings.

This EV-fueled plan has so far not generated the numbers VW was hoping to accomplish, with the company struggling to sell over a million EVs per year across its network of brands. Worse still, some of these EVs have had sluggish starts out of the gate with the Volkswagen I.D. Buzz languishing in dealer lots in the U.S. due to its high price tag.