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Volkswagen: Radical Restructuring Against Price War

VW brand chief Schäfer prepares the workforce for tougher times despite currently strong sales and aims to increase the chronically weak margin to compete with Tesla and Chinese competition.

Should streamline the core brand for more profit: Sales and Marketing Director Imelda Labbé and VW Brand Chief Thomas Schäfer at the presentation of the ID.2All, which, however, is not expected to hit the market as a "genuine" people's electric car until 2025. | Photo: VW.
Should streamline the core brand for more profit: Sales and Marketing Director Imelda Labbé and VW Brand Chief Thomas Schäfer at the presentation of the ID.2All, which, however, is not expected to hit the market as a "genuine" people's electric car until 2025. | Photo: VW.
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Johannes Reichel

The Volkswagen Group is planning a radical restructuring of its core brand VW, aiming to save several billion euros. This move is in response to the price war in the electric vehicle segment, where companies like Tesla, as well as numerous Chinese manufacturers, are outpacing the Wolfsburg-based automaker. The so-called performance program, first reported by Handelsblatt and Der Spiegel, is intended to provide the company with a "buffer" in the competitive market. The recent slim profit margin of three percent is insufficient for this purpose; a target margin of 6.5 percent has been set to keep up with Tesla. Achieving this will require savings of about one billion euros.

In a letter to employees, VW brand chief Thomas Schäfer indicated that the environment is more challenging than ever, with the market marked by recession risks, unstable supply chains, rising raw material and energy prices, and intense competitive pressure.

"The pressure is increasing, the Volkswagen brand must act. We need to achieve good, competitive returns even in times of crisis and a permanently volatile world," Schäfer urged.

In his view, VW is not solidly positioned. Internal working groups are now tasked with developing plans. According to Schäfer, this mainly affects production methods in the factories. However, employee council chief Daniela Cavallo insisted that it cannot involve "tariff cuts or compromises on job security." In the main Wolfsburg plant, there is a job guarantee until 2029. While the business figures are still strong, as Cavallo noted, this masks the fact that "we are heading into a very difficult phase, especially in the volume business," the employee council chief further stated.

Translated automatically from German.
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