Volkswagen's Billion-Euro Efficiency Program Set for Wrap Up by Year's End
The Gist
According to Volkswagen's Works Council chairwoman, Daniela Cavallo, negotiations for Volkswagen's efficiency program aimed at saving the automaker billions of euros are nearing completion, with key points finalized by the end of the year. The cancellation of the "Campus Sandkamp" development enthusiast center project and the reallocation of funds to upgrade existing buildings show Volkswagen's determination to hit their cost-saving targets.
In-Depth
Volkswagen and the Works Council have been in talks since October to reduce the car manufacturer's costs by a whopping ten billion euros by 2026. The plan, known as the "Performance Program," aims to increase the return on sales from 3.4% to 6.5%, official Thomas Schäfer at the meeting in Wolfsburg.
With the cancellation of the "Campus Sandkamp" development center, Volkswagen will now invest 450 million euros in upgrading existing buildings instead of 800 million euros for the new construction. This move reflects Volkswagen's commitment to achieve significant cost savings, as emphasized by Schäfer.
Job cuts remain a factor for Volkswagen to manage with fewer workers in various areas. Although Schäfer implanted a hiring freeze as an immediate measure, negotiations will require compromises, as Cavallo reiterated red lines for negotiations, such as no cuts to the pay scale and job security until 2029.
The Works Council will also consider extending partial retirement as an option for reducing the workforce, ensuring a balance between corporate needs and employee welfare.
Enrichment Insights
Volkswagen's strategy to attain cost savings includes workforce reductions and cost-cutting measures. The automaker aims to decrease its workforce in Germany by over 35,000 employees by 2030, ultimately reducing domestic costs and aligning the internal wage structure with lower industry standards by 2027.
The Wolfsburg plant will be restructured to incorporate modern technologies and new production processes, serving as a hub to produce a new all-electric compact car platform and budget-friendly entry-level electric vehicles.
The Works Council, led by Daniela Cavallo, has played an essential role in negotiations, advocating for employee interests and representing concerns during the restructuring process. Despite the financial sacrifices, such as reductions in benefits, the council fostered acceptance by justifying the measures and addressing employee concerns.
