Volkswagen details cost-cutting measures to bring VW on track
The 6.5. describes the key target, a return on sales of 6.5 per cent for the core brand by 2026. It was first announced in June when VW announced the incoming savings programme.
Another central point of the programme, which will initially run for three years, is to introduce administrative job cuts to reduce costs by 20 per cent, not only at the VW brand but across the entire Group.
To achieve this, Volkswagen will offer termination agreements at all levels as required and maintain its hiring freeze. The positions that will be eliminated will not be filled or only in exceptional cases. The HR measures will take effect for Volkswagen AG from January 2024.
In terms of development, Volkswagen wants to shorten and bring new models to market quicker, in 36 instead of 50 months. They should save more than one billion euros over the period of the planning round up to 2028.
The brand will also reduce the number of test vehicles in Technical Development by up to 50 per cent, as more can be tested on test benches thanks to digitalisation and technological progress. According to VW, this will save around 400 million euros per year.
Further measures include increased purchasing performance in procurement, which will enable savings of over 320 million euros per year, an optimised after-sales business, which is expected to generate more than 250 million euros annually, and the optimisation of production times along the agreed location pacts, which is expected to save over 200 million euros each year. All of these measures already apply for 2024.
Thomas Schäfer, CEO of the Volkswagen Passenger Cars brand, called the measures ” the most comprehensive program the brand has ever launched”. He added, “Our efforts will, in part, start to bear fruit as early as 2024. This is crucial if we are to withstand the increasingly tough competition in extremely challenging market conditions.”
Among the group brands, Volkswagen, in particular, needs a lot of money for the transformation. The core brand, with its high sales figures, has many EV models under development and must convert the plants within a few years.
At the same time, the development of the company’s own battery production and the Cariad software division will cost billions more. While other group brands such as Audi and Porsche are earning well in higher segments despite the transformation, the margin at the core brand has been in the 3.2 to 4.3 per cent range since 2018 (with the exception of 0.6 per cent in the Corona year 2020). For the current year, VW brand boss Schäfer is aiming for more than four per cent before going up to said 6.5%. “Achieving this in 2026 is very ambitious,” he said, “but feasible if we pool our efforts.”
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