Faced with increasing pressure from Chinese competition, declining profits in the Chinese market, and import tariffs in the United States, Volkswagen is preparing for a new round of restructuring.
In an internal memo shared with Reuters, Oliver Blume, CEO of the Volkswagen Group, stated that the current situation is 'more than critical' and advocated for the implementation of substantial cost cuts aimed at restoring the company's competitiveness.
Cost and Margin Analysis
Blume pointed out that Volkswagen's indirect operating costs exceed those recorded by comparable companies by more than 30%. Furthermore, the group's operating margin is below 4%, a level considered reasonable given the current circumstances, but insufficient to sustainably support investments in new technologies, products, and innovations.
Potential Staff Reduction
A particularly worrying aspect is the potential reduction in jobs. Although it is not a fixed target for layoffs, the estimate considered around 50,000 positions as a reference for sizing the necessary adjustment, calculating how many positions would be eliminated to compensate for the cost difference compared to competitors, assuming other factors remained unchanged.
Previously, Volkswagen had already established an agreement to cut approximately 50,000 jobs in Germany by 2030, a plan that covers the Volkswagen, Audi, Porsche, and CARIAD brands. As of June, the group had already formalized more than 28,000 termination agreements.
Portfolio and Operations Simplification
The restructuring also includes simplifying the product range. The Volkswagen Group intends to reduce its model catalog by up to 50% and decrease configuration complexity by up to 75%. This strategy aims to direct investments and development towards the most sought-after products while minimizing engineering and production expenses.
Factories located in Germany, specifically Emden, Hanover, Zwickau, and Neckarsulm, were mentioned in the context of cuts. According to Blume, these units should not reach competitive capacity utilization levels in the 2030s; however, the executive clarified that there is currently no decision regarding the closure of any of them.
This pressure occurs during a period of profound change in the automotive sector, characterized by the advance of Chinese manufacturers in the European market and the demand for large investments in new technologies. For Blume, it is imperative that Volkswagen optimizes its structure and makes its processes more efficient to maintain long-term competitiveness. The company's supervisory board is scheduled to resume discussions on the restructuring strategy on September 4.