VW core brand launches savings programme

The Volkswagen Group is planning a billion-euro savings programme for its core brand VW to bolster profitability and generate money for investments in the transformation to electric mobility. The group will present its overhaul plans to investors at a conference on 21 June.

According to Handelsblatt, the programme could increase annual results by at least three billion euros. And it could bring even more as the company asses a realignment of the model range. These measures include new models and dovetailing production with the group’s sister companies Skoda, Seat and VW Commercial Vehicles.

“We see that our brand – for all its strengths – is not yet solidly enough positioned economically,” brand chief Thomas Schäfer said in an internal letter to employees. He added that by combining production with the above mention brands, the carmaker could save up to one billion euros annually. “We are aligning our plants not according to brands, but according to platforms. This then determines which models are produced there. Not the other way around,” Schäfer announced.

The program explicitly does not involve job cuts, the paper reported from company circles. However, the carmaker would need fewer employees in the long run as the company is switching to EVs, which are less complex to produce. Job reductions would be regulated by partial retirement and a non-replacement of jobs.

But VW not only needs to save money – it also needs to reinvest. For instance, to ramp up production in the US to compete with local manufacturers. In China, too, the company’s turnover is shrinking.

Meanwhile, brand boss Schäfer lowered his target for the operating return on sales to “more than four per cent”. In the first quarter, the VW brand had only brought in a 3 per cent return on sales. It is still being cross-financed with profits from Porsche and Audi – but this should not be a permanent state of affairs, says Handelsblatt.

In Germany alone, the VW brand employs around 120,000 people in and around its nationwide plants. Most recently, it delivered 4.5 million cars, which is almost half of the group’s total sales.

Restructuring of other VW Group subsidies has already begun. At the beginning of May, VW Group CEO Oliver Blume replaced almost the entire board of the IT subsidiary Cariad. The software unit’s problems have delayed product launches at Audi and Porsche by years.

handelsblatt.com (in German), marketscreener.com