by Victoria Waldersee and Christina Amann
BERLIN (Reuters) – Volkswagen and union representatives have agreed on cost-cutting measures that should bring in 10 billion euros by 2026, including 4 billion next year, the manufacturer said automobile.
The measures, which come after two months of discussions amid increased competition, include accelerating development and production times, reducing personnel costs and implementing a more efficient sourcing strategy.
In a press release published on Tuesday, Volkswagen set savings targets for each of these initiatives as part of a program which should enable savings of 10 billion euros by 2026 and achieve a margin of profit of 6.5%, compared to 3.4% during the first nine months of the current year.
The group could also, if necessary, propose severance agreements across the company, said human resources board member Gunnar Kilian. The vacant positions would not be filled in order to reduce the total workforce, a way of reducing the number of employees without breaking the agreement reached with the works council to exclude layoffs.
“Thanks to the agreement reached, we will create the necessary flexibility from 2024 to guarantee the profitability of the company and therefore sustainable employment,” he said.
PERFORMANCE PROGRAMS
The Volkswagen brand, which represents the majority of the automaker’s sales, is the first in the group to begin a cost-cutting program, called “performance programs” by executives who try to convince investors of the credibility and its financial stability.
In a memo to employees earlier this month, Volkswagen said it wanted to cut administrative staff costs at its namesake brand by a fifth, saving a billion euros by 2028 by shortening product development cycles from 50 months to three years, reduce production times and eliminate a new 800 million euro research and development site in Wolfsburg, its historic headquarters.
Other measures include partial pensions for workers born in 1967, or in 1968 for those with severe disabilities, to reduce costs, particularly in the area of administrative staff.
The automaker also plans to save 320 million euros per year thanks to better purchasing performance, generate more than 250 million euros per year by optimizing its after-sales activity, and save more than 200 million euros per year by improving production times.
Reducing the number of test vehicles used for technical development by 50% would save an additional 400 million euros per year, by increasing the number of tests carried out digitally, the group said.
(Reporting by Victoria Waldersee and Christina Amann, French version by Dagmarah Mackos, editing by Kate Entringer)
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