> Part of the problem are the unions and a large ownership stake by the state

That's interesting. I thought VW had been fully privatized, but TIL the German state of Lower Saxony still owns 20% of the company - http://www.volkswagenag.com/content/vwcorp/content/en/invest...

Usually a shareholder needs to own more than 25% of the shares to veto major decisions. For Volkswagen there is a special law lowering this requirement to 20%, which conveniently is the number of shares the state of Lower Saxony owns.

This law also requires a two-third majority in the board of directors (which is distinct from the executive board) to set-up or close down factories. Half of the members in the board of directors are (as in all large German companies) employee representatives, granting them a veto power for those decisions.

This description sounds quite communistic i guess.. But it works really well for everybody.. Some restructuring is necessary though- the whole affair is prone to dig into a technology-tree-branch and stay stuck there.

Or maybe there's no problem at all and the Bloomberg reporter doesn't know what he's talking about?

Some quick Googling suggests that Toyota outsources up to 70% of their parts. (http://artoflean.com/index.php/2014/01/07/444/)

VW is much more vertically integrated. (http://www.autoblog.com/2012/12/06/how-volkswagen-is-run-lik...)

  "How can this be possible? How can VW look so uncompetitive
  from a productivity standpoint, yet out-earn all of its
  competitors?

  "Ah, that's the magic of VW's corporate structure."