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Wolfsburg shocked by Volkswagen gamble

What's good for Volkswagen is good for Wolfsburg, Germany and vice versa.

When you arrive in Wolfsburg, where the carmaker is based, via the main train station you immediately see the German auto giant's sprawling car factory standing tall like a cathedral, with an imposing VW logo.

It's a visual reminder that VW is not simply a carmaker or a multinational corporation. It is a badge of honor woven into the fabric of what it means to be German.

Volkswagen Group headquarters in Wolfsburg, Germany.
Alexander Koerner | Getty Images

With a population of around 120,000, 60 percent of Wolfsburg residents are employed directly by the auto giant. Thousands of others work for the parts and components suppliers that service the factory.

Volkswagen itself pays tribute to Wolfsburg on its website, portraying it as a symbol of Germany's "economic miracle." But following a week in which the emissions cheating scandal sent shockwaves around the world, that miracle is starting to look that much more shaky.

'I don't think they know what they've done,' Wolfsburg resident Michael Kolp tells CNBC. 'They've destroyed Made in Germany, especially in the United States."

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That sentiment has been echoed by members of the German press, who are ramping up pressure on Volkswagen's new boss Matthias Mueller to make good on his pledge to restore trust in the country's largest automaker before it's too late.

"Please clean up, Herr Müller!" was the translated message from center-left daily Süddeutsche Zeitung, saying the new boss must "open up the empire which has been run for years as a centralised, insular kingdom."

Volkswagen's supervisory board took the first steps at tackling that insularity on Friday by unveiling a corporate restructuring plan which aims to streamline parts of the business and give more power to the 12 brands under the Volkswagen's byzantine organizational structure.

Still, Wolfsburg residents who have been disillusioned by the scale of diesel deception, suggest more will be needed to eliminate a perception of hubris at the highest ranks. The owner of an area hotel who asked to remain anonymous has lived in the area since 1971 and expressed disappointment and disbelief' that executives chose to take such a serious "gamble."

"We'll have to deal with this for years now," the owner said.

That fear that the fallout from the emissions cheating scandal is just getting started is keeping Wolfsburg residents on edge.

A server at a restaurant which serves mostly VW employees said there is a lot of discussion among the customers over whether job cuts could be coming and what impact it will have on the local economy and even house prices.

The sense of nervousness is also piling the pressure on policymakers in Berlin to prevent the crisis in Wolfsburg from becoming a catastrophe for Europe's largest economy.

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