Volkswagen executives say the company will have to save €10 billion (roughly $15 billion CAD) via cost cutting.
Volkswagen brand CEO Thomas Schaefer said high costs and low productivity were making the brand's vehicles uncompetitive in the marketplace. The €10 billion savings program will include staff cuts, among other measure.
The automaker is in the midst of negotiations with its works council on a cost-cutting plan within the Volkswagen brand, which will represent the first step in a Volkswagen Group-wide campaign to improve efficiency as part of the transition to electric vehicles.
“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 the automaker's headquarters in Wolfsburg, Germany, according to a post on the company's intranet site that was picked up by Reuters.
Volkswagen is not having an easy time of it these days. The company is losing market share in China and has to contend with the price war waged by Tesla, which VW has identified as enemy number one. Worse still, due to falling demand in Europe, the company has been forced to slow down or halt production of electric vehicles destined for that market.
Recall that Volkswagen previously said it wanted to achieve workforce reductions via the “demographic curve” and so avoid firing workers until 2029.
At Monday's meeting, Human Resources Board member Gunnar Kilian said the company aims to get the needed reductions through partial or early retirement agreements.
Beyond the question of its workers, the bulk of the €10 billion savings will be achieved with measures other than simply reducing staff, said Killan. Details of what the company has in mind are promised for a later date.
Added Killan, “We need to finally be brave and honest enough to throw things overboard that are being duplicated within the company or are simply ballast we do not need for good results.”
News of the cost-cutting program comes as no great surprise. Volkswagen has been aware of its problems for some time. Back in June, Schaefer told the company's executives that the “roof was on fire”, and that costs were being allowed to get too high, and in several areas.
Many will be watching just what measures Volkswagen ends up adopting, but also whether any other of the major automakers will be forced to follow suit. What VW is experiencing is not unique in terms of the expenses and realities associated with electrification.
Keyword: Volkswagen Needs to Save $15 billion CAD; Cuts Are Coming