Volkswagen, in its pursuit of a 10 billion euro cost-cutting initiative for its eponymous brand, has encountered delays, sources familiar with the matter reveal. Initially slated for completion by October 2023, the measures are now anticipated to be solidified by year-end.
Volkswagen had initially communicated its intention in June to have the 10 billion euro cost-cutting measures in place by October 2023. However, the inaugural meeting with workers’ representatives transpired only in early October, causing a revision in the timeline. This initiative is integral to Volkswagen’s objective of achieving a return-on-sales target of 6.5% by 2026. This metric serves as a yardstick for evaluating a company’s operational efficiency.
The postponement constitutes a setback for Volkswagen, currently navigating a strategic repositioning, with commitments to significantly reduce fixed costs and enhance productivity to augment profit margins. The anticipated cost-saving strategies will emphasize a reduction in high-volume models and the streamlining of production processes for VW passenger cars, SEAT/CUPRA, and Skoda. While the Volkswagen brand boasts the company’s highest sales volume, profit margins have traditionally trailed those of the luxury Audi and Porsche lines.
Volkswagen is poised to apply analogous cost-cutting measures, termed ‘performance programmes,’ across all its brands, with the company’s finance chief, Arno Antlitz, stipulating substantial progress by year-end. A spokesperson for the Volkswagen brand acknowledged the commencement of discussions with workers in early October but abstained from commenting on specific details or the adjusted timeline. Brand leader Thomas Schaefer had mentioned last month that they were diligently crafting a concrete set of measures “by autumn.”
According to German corporate governance regulations, labor representatives comprise fifty percent of the company’s supervisory board. A spokesperson for the works council asserted that the inaugural meeting merely marked the outset of discussions. They cautioned against any encroachments on collective bargaining agreements or jeopardizing job security, vowing non-acceptance of such proposals. Works council head Daniela Cavallo expressed discontent with management last month for providing insufficient information regarding the program.
Despite the delay, Volkswagen is committed to upholding its established timeline, assuring adherence to legal frameworks and regulations in the formulation and execution of any measures. The company’s workforce is resolute in their dedication to safeguarding their rights and interests throughout this process.
Source: Reuters
