Volkswagen (VW) is reportedly set to reduce one-fifth of its administrative workforce, according to an internal memo, as part of the company's broader cost-cutting initiative announced in June. The automaker aims to achieve €10 billion ($10.8 billion) in savings by 2026, with a focus on early retirements rather than immediate layoffs. This move comes amidst challenges faced by VW in the evolving automotive landscape, marked by a shift to electric vehicles (EVs) and increasing competition from EV manufacturers like Tesla and BYD.
VW's CEO of passenger cars, Thomas Schäfer, communicated the need for operational changes, stating, “We will need to operate with fewer people in many areas at Volkswagen in the future.” The company is grappling with a decline in electric car orders in Europe, prompting production cuts at several German plants. The job cuts and cost-saving measures aim to address market challenges and enhance competitiveness in the rapidly evolving automotive industry.
The broader cost-saving measures include shortening product cycles to three years from 50 months, reducing overall production times, offering fewer model options, and eliminating plans for a new €800 million research and development site in Wolfsburg, Germany. These steps align with VW's goal of achieving a return-on-sales target of 6.5%, up from 3.6% last year, in response to industry pressures and changing market dynamics.
While the job cuts are part of VW's strategy to navigate the transition to EVs, the company emphasizes its commitment to managing the workforce reduction through early retirements rather than immediate terminations. The move aims to streamline operations, eliminate inefficiencies, and position VW for sustainable growth in the evolving automotive landscape.