German automaker Volkswagen and worker representatives have agreed to measures for a cost-cutting drive at the automaker’s factories in order to yield EUR 10 billion (USD11 billion) in gains by 2026, up to 4 billion of which is expected to come in by next year, the company said. The measures come after two months of talks amid intensifying competition in the electric age, include speeding up development and production times, reducing staff costs and implementing a more efficient procurement strategy.
The automaker has set savings targets for each of these measures in a package it hopes will add up to EUR 10 billion in gains by 2026 and a profit margin of 6.5%, up from 3.4% in the first nine months of this year. Human resources board member Gunnar Kilian told Reuters that the company could also offer selective contract termination agreements, with vacated roles left unfilled to reduce total headcount – a means of reducing the number of staff without breaking its agreement with the works council to rule out dismissals. “With the agreement reached, we will create the necessary flexibility from 2024 to successfully secure the company’s profitability and thus sustainable employment,” he said.
In the era of intense competition, Volkswagen is the first brand from the Volkswagen Group to undergo a cost-cutting drive. It has been dubbed ‘performance programmes’ by company executives attempting to convince investors of the carmaker’s credibility and financial stability.
Volkswagen, in a memo to staff earlier this month, said that it planned to slash administrative staff costs at its namesake brand by a fifth, save a billion euros by 2028 through reducing product development cycles to three years from 50 months, cut production times and scrap a planned new 800-million-euro R&D site in its home city of Wolfsburg.
It plans to save another EUR 400 million annually by reducing the number of test vehicles used in technical development by up to 50%, with more testing done via digital processes.