Volkswagen Cost-Cut Measures

I=5

  • From 2027, Volkswagen will overhaul its wage structure, following a recent agreement with the works council.
  • Internal documents indicate that wage cuts will fall by 6% (provisional target) from 2027 at the Volkswagen brand.
  • Overall, labour costs are expected to decline by €1.5 billion annually, with an agreement on the company wage settlement until 2030.

Assessment
The fact that wages will fall by 6% from 2027 indicates that the cost benefits in the next two years could be small.

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I=5, VW brand

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.

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I=5, VW brand

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.
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I=4

  • 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.

I=7, VW brand

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.

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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.

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I=4, VW brand

  • Works council boss Daniela Cavallo doesn’t know how Volkswagen will reduce jobs by 35,000 by 2030.

    “The 35,000 jobs that the company wants to cut by 2030 will not disappear as if by magic,” said Cavallo at an employee meeting.

  • On the other hand, brand’s boss, Thomas Schäfer believes the measures will make the company more superior.

    “We will be the technologically leading volume manufacturer by 2030. The number one in Europe, even in the electric age,” he said.

I=4, Porsche

  • In an interview with Stuttgarter Zeitung, Porsche’s Human Resources head Andreas Haffner said they will cut 1,900 jobs in the coming year.
  • Haffner said the contracts of 2,000 employees expired last year and this year.
  • Porsche employs around 30,000 people.

I=5, VW brand
Volkswagen extends partial retirement offer to cover 4,000 more employees, those born in 1968

  • Volkswagen extends the offer of partial retirement to employees born in 1968.
  • According to works council, the new offer affects about 4,000 employees.
  • Volkswagen’s partial retirement offer initially covered employees born between 1965 and 1967.
  • Volkswagen announced in December that 35,000 employees will leave the company by 2030, partial offer being responsible for 24,000.

I=2, VW Group

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.

  • Cariad currently has around 6,500 workers.

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.