Volkswagen admits its brand is ‘no longer competitive’

Due to high costs and low productivity Volkswagen is no longer competitive. The balance corresponds to the head of the brand, Thomas Schaefer, who told his employees that They were ready to go ahead with staff reductions. to implement your overall cost reduction strategy.

“Due to many of our pre-existing structures, processes and high costs, we are no longer competitive as a Volkswagen brand,” Schaefer told an employee meeting, according to internal documents reviewed Reuters And Bloomberg. “Business as usual will not be sufficient without significant cuts… We need to solve critical problems, including personnel issues,” the executive told workers’ representatives at the main plant in Wolfsburg, Germany.

Volkswagen has signed an agreement with the works council to preserve jobs until 2029. take advantage of the demographic curve reduce your workforce. Midway through the year, the company offered workers born in 1966 part-time work or early retirement. About 3,000 people were expected to accept the offer.

Gunnar Kilian, a member of the human resources board, acknowledged at Monday’s meeting that much of the savings target will be achieved through staff reductions. Full information will be clarified by the end of the year.

The Volkswagen Group also produces the Porsche, Audi and Škoda brands. Oliver Blume, the company’s CEO, wants VW, its flagship brand, to achieve savings of around 10 billion euros – 10.9 billion dollars – by 2026. This will allow the company to achieve its target return on sales of 6.5%, as company representatives explained. A key step for the entire group to improve the efficiency of the transition to electric vehicles.

Volkswagen: “Other manufacturers would close factories in such a situation”

“We are not making enough profit from our cars to finance the transformation and our future with our own resources,” Schaefer insisted to the workers. “Other manufacturers would close factories in such a situation.”

The success of the plan will depend in part on negotiations with workers. Volkswagen has a sizeable workforce protected by the country’s strong trade unions and its own works council, a group of elected staff representatives who negotiate with management.

The reduction plan comes at a time when the electric vehicle market is becoming increasingly competitive. In Europe they face tough competition from Tesla and Chinese automakers such as BYD. And in other markets, for example in China, it is no easier for them.

Volkswagen Group’s sales at the Asian giant, for example, fell sharply in the first half of 2023., despite the fact that the Chinese electric mobility market is growing at 20%. Schaefer acknowledged as much on Monday: orders received “for electric vehicles are below our ambitious expectations,” he said. Financial Times.

Herbert Diess, who resigned as CEO in 2022 after a dispute with the works council, said the company Among its 290,000 workers in Germany, the company had at least 30,000 additional employees. “We have to be brave and honest enough to throw out things that are duplicated within the company,” noted Kilian of the HR council. “Or those that are just a burden that we don’t need to get good results.”