Volkswagen’s cost-saving crusade intensifies
VW, Germany’s renowned car manufacturer from Lower Saxony, has taken a drastic turn. Last year, the company announced a far-reaching cost-cutting plan, and now it’s making it crystal clear that it won't skirt layoffs.
Thomas Schäfer, head of the Volkswagen brand, spelled it out for the workforce. According to him, Volkswagen's current organizational structure, processes, and high expenses make it uncompetitive. Schäfer revealed this at a Wolfsburg site shop stewards meeting, emphasizing that substantial cuts are necessary. "We have to tackle the critical issues, including personnel," he stated in the internal memo.
Partial retirement is one strategy being considered to decrease costs. Gunnar Kilan, VW's HR Board Member, mentioned that the population demographic curve may work in their favor. However, he noted that the majority of the savings aren't likely to stem from partial retirement. The exact number of layoffs hasn't been specified yet.
Daniela Cavallo, chair of the Works Council, insists that collective agreements and job security must be preserved until 2029. Negotiations between management and the works council on the efficiency program, which is projected to generate a whopping €10 billion, are ongoing. The goal is to strike an agreement before the year ends.
Employees will gather on December 6 in Wolfsburg for an update on the progress of the cost-cutting plan. The final decision on the job reductions and other cost-saving measures has yet to be made.
Volkswagen's austerity drive focuses on job cuts, as the company grapples with competitiveness issues and high costs. Part-time retirement is being explored, but the majority of the savings are expected to stem from alternative means.
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Volkswagen's extensive cost-cutting plan involves specific measures to tackle high costs and improve competitiveness:
- Job Cuts:
- Over 35,000 jobs could be slashed by 2030, affecting one-fourth of the German permanent workforce
- Job cuts will occur through partial retirement, severance payments, and operational adjustments, including closures of certain plants
- Partial Retirement:
- Encouraging older employees to retire early is part of "socially responsible reduction" program with IG Metall union
- Severance Payments:
- Individual termination agreements with severance pay will be used to further reduce the headcount
- Real Wage Reductions:
- Collectively agreed bonus payments may decline significantly, potentially dropping from €2,500 to €1,500 to €2,000 per year
- Holiday pay may also be cut, with part of the payment given in staggered installments from 2027
- Operational Adjustments:
- Production volume will likely be reduced to an equivalent of two to three large plants to achieve substantial savings
- Cost Savings Targets:
- Volkswagen aims for a 6.5% margin by 2029, up from the initial goal of reaching it by 2026, requiring additional cost-cutting measures
- Workforce Reductions Across All Departments:
- The cost-saving measures will impact all areas of the company, including development, production, and administration
This extensive cost-cutting plan is part of Volkswagen's broader strategy to enhance its footing in the evolving automotive market, particularly in the electric vehicle segment, where competition is fierce from both cost-effective Chinese manufacturers and high-end EV companies like Tesla.
