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Volkswagen has reached the long-awaited agreement with the union for the maxi-savings plan of 10 billion euros – 4 billion is the target already set for 2024 – aimed at relaunching the low profitability of the brand that gives its name to the group. The protagonists of the agreement are the CEO of VW, Thomas Schäfer, the head of human resources, Gunnar Kilian, and the president of the works council, Daniela Cavallo. The objective is to double margins, bringing the operating return on sales from 3% to 6.5% by 2026. The performance of ordinary shares showed little change at the end of the session in Frankfurt. The stock has lost 3% since the beginning of the year but began a recovery phase at the end of October, which pushed it from 99 to 115 euros.
CEO Blume’s objectives
The measures of the “Accelerate Forward/ Road to 6.5” plan, on a three-year basis, aim to cut personnel costs (across the Group) by a fifth, particularly in administrative roles, and to offer early retirement options starting from age 57 years. The exit options will also concern those born in 1968 with serious disabilities.
Volkswagen has already implemented a hiring freeze, not renewed contracts for fixed-term workers and reduced work shifts. CEO Oliver Blume aims to improve the financial performance of the brand that gives its name to Europe’s largest car manufacturer, a task made more difficult by demand for electric vehicles, which is weaker than expected in both Europe and the United States. Another key brand for the group, Audi (600 contracts not renewed at the Neckarsulm plant), and the unit dedicated to software development, Cariad, have also started cost reduction plans.
The company then intends to focus on material and product costs, fixed and production costs and revenue growth. In an internal note at the beginning of December it emerged that the car manufacturer expected to save, among other things, 320 million euros a year thanks to better purchasing performance, and to obtain over 250 million from the optimization of post-production activities. sales and save over 200 million by improving production times (development times for new models reduced from 50 to 36 months). A further saving of 400 million was expected thanks to the reduction of up to 50% of test vehicles for technical development, increasingly replaced by tests carried out using digital processes.
Incentives offered to customers instead of the State
The German giant is under pressure especially in China, its main market, where it lost leadership to electric vehicle manufacturer BYD, which overtook it in the first quarter. And that the moment is truly critical is demonstrated by the fact that, after the sudden stop of incentives for the purchase of electric cars, over the weekend, by the German government (an obligatory step after the debt brake imposed by the Constitutional Court, of which the multibillion-dollar Climate Fund paid the price), the Wolfsburg company has declared that, like other manufacturers, for the moment it will be the one to help customers: Vw will offer the entire bonus for all eligible electric cars in its series IDs ordered by Dec. 15 and registered by the end of March, the company said.
2023-12-19 19:07:30
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