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CEO Oliver Blume said Volkswagen is not planning another gigafactory battery site at the moment.
“Based on market conditions, including the sluggish ramp up of the BEV market in Europe… there is for the time being no business rationale for deciding on further sites,” he said in a statement provided by Volkswagen’s Czech unit Skoda Auto.
Volkswagen was looking to build another battery gigafactory in eastern Europe.
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Volkswagen scales back external hires at its six locations in Lower Saxony and Hesse as part of its cost-cutting drives.
“Due to the ongoing efficiency programs at Volkswagen AG, external hiring will be temporarily limited and no external positions will be advertised,” said a spokesman.
Only necessary tasks such as legal would be hired externally.
The works council is in support of the action.
“In view of the recent efficiency efforts, it is understandable that the company is now reducing further job creation through new hires to the bare minimum,” said a spokesman. “We see this as an opportunity to advance the key issue of internal transformation in an even more concentrated manner than before.”
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Volkswagen plans to achieve the benefits of its cost savings efforts as early as 2024.
“As early as next year, we plan to achieve an impact of more than 10 billion euros for the group through our brands’ performance programs,” CEO Oliver Blume told the “Frankfurter Allgemeine Zeitung”.
However, direct impacts on the result are not expected until 2025 but should help offset the burdens next year.
“2024 will be a very challenging year economically,” he said. “The goal is to manage the group stably so that we can get started from 2025.”
Blume pointed out that the cost-savings program will include staff reduction.
“In order to increase our efficiency, it is also about reducing staff,” he said. “We use socially acceptable instruments such as the demographic curve or regulations for partial retirement.”
Details on the employee reductions are expected later this year.
Wow a 10 billion dollar headwind in 2024 is a significant warning. We definitely need to get a better grip if those warnings are coming from all manufacturers across the industry.
It is obviously good to see that Volkswagen is already working on counter measures but it needs to be seen if they indeed manage to achieve those ambitious targets.
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Volkswagen head of human resources Gunnar Kilian also pointed out that workforce reduction would be through agreements on partial or early retirement.
CEO Thomas Schaffer pointed out that the brand is no longer competitive.
“With many of our pre-existing structures, processes and high costs, we are no longer competitive as the Volkswagen brand,” Schaefer told a staff meeting at Volkswagen’s headquarters in Wolfsburg.
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Assessment
Volkswagen Group incurred 11.7 billion euros in administrative expenses in 2022. The Group had 675,000 employees with Volkswagen Brand having around 200,000. That means a fifth reduction in administrative costs of the Volkswagen Brand would lead to a cost-savings of around 600 million euros, representing 0.3% and 3.1% of the Group’s total operating expenses and operating profit, respectively.
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Volkswagen’s struggling software unit, Cariad, has reached a deal with the union representatives to cut its internal development costs by 20% annually until 2028.
If the 20% target is not reached, voluntary buyouts will be offered but the timeline for the buyouts wasn’t made public.
Cariad employs around 6,500 employees.
Assessment
Cariad generated a revenue of 796 million euros in 2022 and incurred an operating loss of 2 billion euros. That means it incurred operating costs of about 2.8 billion euros. Hence a 20% reduction in internal development won’t be much for the Volkswagen Group which generated a revenue of 279.2 billion euros and operating profit of 22.1 billion euros in 2022.
https://www.volkswagen-group.com/en/financial-reports-volkswagen-group-15928
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Assessment
It’s good to see the company taking initiatives to improve its operating performance, especially given the 2024 macro warning they recently gave. It’s also good that they are finally releasing the cost-savings program after two months delay. 4 billion euros is equivalent to around 1.4% and 18% of the Group’s total operating cost and operating profit, respectively in 2022. However, it still remains to be seen whether the brand will implement the program within the timeline given.
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Volkswagen managers will not received the inflation bonus of 1,000 euros and a salary increase of 3.3% begining from May 1 as part of the company’s goal to cut costs.
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Volkswagen lowers its operating return on sales to a range of 6.5%-7.0% due to possible closure of Brussels plant
"The Audi Q8 e-tron model family, which is currently produced at the Audi site in Brussels, is affected by a segment-specific intensified drop in demand, "Audi statement reads. “With the ramp-up of the new models on the Premium Platform Electric, the company is now seeing a drop in demand for the Q8 e-tron. This has resulted in a sharp drop in incoming orders.”
Assessment
The closure of the Brussels plant doesn’t mean Audi wants to discontinue Audi Q8 e-tron since it was already planning to shift the model’s production to San José Chiapa plant or China. Though only 47,000 units of Audi Q8 e-tron were delivered in 2023, the decline in its demand is a bad sign for other Volkswagen EV SUVs.
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Volkswagen Brand struggling to achieve its cost-cuts goal, Handelsblatt reported
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Volkswagen is offering employees up to €450,000 to leave the company, Wolfsburger Allgemeine Zeitung reported
Volkswagen is offering up to €450,000 to employees if they agree to retire early as part of its push to cut administrative expenses by 20%, Wolfsburger Allgemeine Zeitung reported.
The company has also initiated hiring freezes and frozen access to Tarif Plus, its highest paying scale group.
Though the company has offered partial retirement to employees born in 1967 and 1968, it is hoping that 1,500 workers born between 1961 and 1964 can also take the retirement package.
“We must abandon the notion that one day a million vehicles a year will roll off the assembly line in Wolfsburg. We need to prepare for significantly fewer cars,” unidentified manager told the publication.
A Volkswagen spokesperson couldn’t comment on the specifics of the publication but said it was part of the firm’s “ambitious performance program aimed at increasing VW’s operating profit margin.”
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Volkswagen can no longer rules out factory closures in Germany, a statement reads
Volkswagen said it can no longer rule out factory closures in Germany in order to achieve its cost-cutting measures.
It said that it’s looking to close one large vehicle factory and one component plant in Germany.
“The economic environment has become even tougher and new players are pushing into Europe,” Volkswagen CEO Oliver Blume said in a statement. “Germany as a business location is falling further behind in terms of competitiveness.”
Additionally, Volkswagen plans to bring to an end its employment protection program.
“The situation is extremely tense and cannot be resolved through simple cost-cutting measures,” VW brand CEO Thomas Schäfer said.
Volkswagen added that a comprehensive restructuring of other brands will also be needed.
Daniela Cavallo, Chair of Volkswagen’s Work’s council has vowed to fight bitterly the new plans.
The labor representatives control half of the seats on Volkswagen’s supervisory board while the German state of Lower Saxony which normally sides with the workers control 20% stake in the company.
What is your assessment of the impact of this? Which plants, how many jobs and which amount of cars could be affected? Would the production be increased somewhere else? What could it mean for cost savings, margins, revenue and profits?