Volkswagen targets €10 billion growth with cost-cutting strategy

Volkswagen, in collaboration with workers' representatives, has finalised the fundamental aspects of a cost-cutting initiative within the VW brand. The plan is expected to contribute positively to results by generating 4 billion euros ($4.4 billion) in 2024, forming part of a broader strategy to achieve 10 billion euros in gains by 2026 through cost reduction and revenue enhancement. These measures are integral to Volkswagen's overarching efforts to enhance productivity and maintain competitiveness amid the shift towards electric vehicles.

Earlier this month, Volkswagen outlined its intentions to reduce administrative staff costs by 20 per cent, save one billion euros by 2028 by shortening product development cycles, and abandon a planned 800-million-euro R&D site in Wolfsburg. Additional steps include enabling partial retirement for employees born in 1967 or 1968 with severe disabilities, particularly targeting administrative personnel expenses.

Further cost-cutting measures outlined in Tuesday's statement encompass a yearly saving of 320 million euros through improved procurement performance, over 250 million euros through optimisation of after-sales business, and more than 200 million euros through enhanced production efficiency. Additionally, the company aims to reduce annual expenses by 400 million euros by decreasing the number of test vehicles used in technical development by up to 50 per cent, favouring digital testing methods.

In cases where necessary, Volkswagen retains the option to propose selective contract termination agreements throughout the organisation, according to Gunnar Kilian, a board member overseeing human resources. Kilian emphasised that the agreement reached provides the essential flexibility from 2024 to secure the company's profitability and ensure sustainable employment.

(With Reuters Inputs)