VW brand to shrink workforce further in bigger savings push

Bloomberg

Volkswagen AG’s main car brand plans to deepen cost cuts and ax more jobs as profits slip in the industry’s shift to electric and self-
driving cars.
The German carmaker said on Wednesday it will eliminate as many as 7,000 positions — with measures including early retirement and not filling vacant positions — for an annual profit gain of 5.9 billion euros ($6.7 billion) starting in 2023.
“We will significantly step up the pace of our transformation so as to make Volkswagen fit for the electric and digital era,” VW brand COO Ralf Brandstaetter said.
The VW car brand, which accounts for about half of the group’s global deliveries, employs about 185,000 workers out of a total workforce of 650,000. VW has been pushing to rein in bloated expenses to lift profitability that’s trailing rivals.
Return on sales for VW’s namesake brand last year fell to 3.8 percent from 4.2 percent because of higher spending on future electric models and production bottlenecks triggered by stricter emission rules in Europe.
Labor costs are a “big concern” that risk derailing a much needed streamlining of operations, VW Chief Executive Officer Herbert Diess told investors. Diess, who also heads up the VW brand, has been axing slow-selling models and car variants to reduce complexity. Further measures will include lowering material costs and lifting productivity at its factories by 5 percent to achieve an operating profit margin of 6 percent in 2022. Volkswagen rose 0.8 percent to 145.1 euros at 9:42 am in Frankfurt trading. The shares have declined 4 percent in the past 12 months.
VW signed a labour pact in 2016 to cut 30,000 jobs worldwide and generate 3 billion euros in annual savings.