VW brand cost-cutting plan running behind schedule, report says

VW brand cost-cutting plan running behind schedule, report says

Automotive News Europe — 2023-10-17

Automotive Industry

Volkswagen Group is running behind schedule in defining key measures of a planned  €10 bn ($10.5 bn) cost-cutting drive for its namesake brand, two people familiar with the matter said, as talks with powerful labor leaders drag on.

VW's volume brand said in June that the drive's measures, designed to help it meet a return-on-sales target of 6.5% by 2026, were expected to be in place by October 2023.

The first meeting with workers representatives, however, did not happen until early October and key measures are now expected to be defined by year-end, the sources said.

Return on sales is a metric used to evaluate a company's operational efficiency.

A delay would mark a setback for VW, which is in the midst of a strategy shift and has pledged to slash fixed costs and improve productivity to boost margins in the face of sagging stock-market performance.

VW has said that cost-cutting plans would include focusing on fewer high-volume models as well as streamlining production of VW passenger cars along with the Seat, Cupra and Skoda brands.

The VW brand has the company's highest sales volume by far, but margins traditionally lag behind luxury Audi and Porsche vehicles.

The company plans to implement similar cost-cutting drives, dubbed 'performance programs,' across all brands, with finance chief Arno Antlitz in July demanding progress by the end of the year.

A VW brand spokesperson confirmed that talks began with workers in early October and that it would not comment further on the timeline or content of discussions.

Brand chief Thomas Schaefer said last month the company was working on a concrete package of measures "by autumn."

Labor representatives, including the head of VW works council Daniela Cavallo, make up half of the company's supervisory board per German corporate governance law for large companies.

A works council spokesperson confirmed a first meeting had taken place but declined to comment further on the timeline.

"This was just the start," the spokesperson said of the meeting, adding the works council would not accept any cuts to collective bargaining agreements or threats to job security.

Cavallo, last month criticized that management still had not provided more information on what the program entailed.