Buckling Under Pressure: Pushing Discounts and Redundancies Hits VW Profit
VW's earnings decrease due to rebates and layoffs
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The core brand of Volkswagen Group is grappling with a squeezing profit margin. deep discounts for electric vehicles, the introduction of new models, and a hefty severance program have weighed down the earnings of the Volkswagen brand itself. On a bleak Thursday, the Wolfsburg-based automaker disclosed a 25% dip in profit for 2024 compared to the previous year, despite a rise in vehicle delivery. David Powels, the group's CFO, candidly admitted that restructuring costs had adversely affected the company's financial standing. "This year marks a turning point for us - we are now focusing on making our organization leaner and more sustainable for long-term success" Powels added.
The management of Volkswagen had reached a consensus with the works council at the end of 2023 over a performance program that includes job cuts in the indirect area (admin and development). This move has significantly reduced factory costs per vehicle in Volkswagen's plants by 3%, mainly through optimized shifts as per the carmaker. The emphasis on cost-cutting measures has escalated lately. In December, Volkswagen and the labor union agreed on the elimination of around 35,000 jobs.
Currently, Volkswagen is pushing hard to implement the agreed measures to reach an operating margin of 8% in the entire core brand group. The current margin stands at 5%.
The source for this article is ntv.de and rts.
- In an effort to reach an operating margin of 8% for the entire core brand group, Volkswagen is now implementing measures agreed upon with the works council.
- The cost-cutting measures at Volkswagen, including job cuts and optimized shifts, have resulted in a reduction of factory costs per vehicle by 3%.
- Amidst squeezed profit margins, Volkswagen Group has resorted to deep discounts for electric vehicles, new model introductions, and a hefty severance program, as seen in the elimination of around 35,000 jobs agreed upon with the labor union in December.
