Collective agreement provides for up to 7 hours reduction in working hours in case of a crisis
According to Business Insider, there is a clause in the collective agreement reached with the works council and which affects 120,000 workers in Germany, that allows Volkswagen brand to reduce the number of working hours to be reduced to 28 hours from the current 35 hours incase of bottlenecks.
The clause provides that before the hourly reduction kicks in, all other measures such as reducing overtime and short-time work should have been exhausted.
“In the event of temporary employment problems or a poor economic situation, the company parties may collectively reduce regular weekly working hours to up to 28 hours per week in order to secure employment. In this case, compensation must be granted," the clause reads.
According to Business insider rough calculations, employees would forego half their pay for 7 hours if their working hours are reduced completely, translating to 10% of their gross salary per month.
According to Reuters, a factory worker in Germany earns around 62 euros per hour.
Assessment
Based on the numbers above, Volkswagen brand pays its factory workers in Germany 1,041,600,000 (62x35x4x120,000). A 10% reduction would save the brand around 100 million euros per month or 1.2 billion euros per year.
Collective agreement is tied to measurable milestones
CFO Arno Antlitz told investors in New York that the collective agreement reached is tied to clear and measurable milestones and new measures would be developed if the goals are not being met.
Antlitz did not specify the milestones.
He said that the next step after the deal is to increase the number of cars produced per worker.
Volkswagen is looking to share production costs with Chinese players at its unwanted plants in Germany.
“We’re open for any discussion on any topic with any partner. In a dynamic world, you have to keep all options open," David Powels, VW’s chief financial officer said.
Volkswagen board members want more cost cuts, Handelsblatt reported
Concerns are growing among Volkswagen board members that the cost cut measures agreed with the union at the end of 2024 will not be enough to turn around the brand, Handelsblatt reported citing sources familiar with the matter.
As such, further cost cut measures are needed.
Handelsblatt pointed out that the company has pushed back on its operating margin target, aiming to achieve the 6.5% target in three or four years instead of next year.
Volkswagen declined to comment on the report.
Assessment
This makes sense given a recent article that said wage cuts are expected to fall by 6% from 2027. Also, based on the collective agreement details, most of the cost-saving measures will likely come in 2030. But it’s good to see the management championing for more cost cuts.
I agree. I wonder if all those cost cuts are a result of the accountability and culture changes that Blume implemented when he took over. (+ different compensation for management) I think it was part of his ten-point program.
Once we have a better assessment page of his strategy, if it works, and how it relates to cost cuts, we should cross-link it here.
Volkswagen’s management board agrees to a 11% renumeration cut
Volkswagen board members have agreed to reduce their renumeration by 11% in 2025 and 2026, 8.5% in 2027, 6.5% in 2028 and 5.5% in 2029, Handelsblatt reported.
Volkswagen’s nine members of the Board of Management earned a total of more than €51.1 million in 2023, hence a 11% reduction will translate to only €5.621 million.
I=6, Cariad Cariad will cut 1,600 jobs or around 25%
Cariad plans to cut 1,600 jobs by the end of the year so as to make it more effective and adapt it to its role in the Group, a company spokesperson confirmed.
“In close cooperation with the brands, we have improved the quality of the software and increased our delivery capability,” said the spokesperson. “The successes are visible.”
The software developers will be exempted from the job cuts.
I=6, Audi Audi to cut indirect jobs by 7,500 by 2029, leading to cost savings of 1 billion euros annually in the medium-term
Audi and works council have reached an agreement for the reduction of 7,500 indirect jobs by the end of 2029.
According to dpa-afx, 6,000 employee cuts will be completed by 2027.
Profit -sharing for Audi employees will also be reduced by many millions of euros for several years.
Audi said these measures will enable the company to achieve medium-term savings of more than one billion euros annually.
The agreement extends the job protection for employees until the end of 2033 from 2029
Assessment
A cost savings of 1 billion euros annually represents 26% of Audi’s 2024 operating profit of 3.9 billion euros, which is not bad. However, medium term could mean 5 years from now, which is far away.