Volkswagen could eliminate around 50,000 more jobs worldwide as part of a broader effort to improve its cost structure and compete more effectively with rival carmakers, reported Reuters. If the company moves ahead with the plan, total job reductions across the Volkswagen Group could reach about 100,000, including 50,000 cuts that have already been agreed.
Volkswagen CEO Oliver Blume told employees that the company still faces a major cost challenge, reported Reuters citing an internal memo. He said internal calculations show Volkswagen has a cost disadvantage of about 20% compared with similar companies, making further savings necessary.
Volkswagen has struggled with falling profits as it deals with billions of euros in tariff-related costs, intense competition in China and growing pressure to make its manufacturing operations in Germany more efficient.
Why is Volkswagen looking at more job cuts?
Blume told staff that internal calculations show Volkswagen’s costs are about 20% higher than those of comparable companies, reported Reuters citing the memo. According to the memo, that gap translates into a “theoretical deduction” of another 50,000 jobs worldwide.
The company had already agreed to cut around 50,000 positions across the group, including at its Porsche and Audi subsidiaries. However, Blume said more savings may be required if Volkswagen wants to match the cost competitiveness of its rivals.
“We are currently assessing across all brands, companies and regions how many adjustments are actually necessary and feasible,” Blume said in the memo, as reported by Reuters.
The CEO said that the figure is based on internal calculations and does not represent a final decision. Volkswagen is reviewing its operations before determining the scale of any additional workforce reductions.
Blume told employees that the company must continue its efforts to reduce costs even after the earlier restructuring plans. “We are currently assessing across all brands, companies and regions how many adjustments are actually necessary and feasible,” Blume said in the memo, as reported by Reuters.
What challenges does the company face?
The memo came after employee representatives demanded greater clarity from management over Volkswagen’s restructuring plans. Blume presented the proposals to the company’s supervisory board last week, but people familiar with the matter told Reuters that labour representatives on the board opposed the plans. The proposals included additional job reductions and the possible closure of four factories, reported Reuters citing sources.
Blume also warned that several German plants face an uncertain future if Volkswagen cannot identify profitable production plans for them over the next decade. “As of today, we still cannot confirm competitive use cases for the plants of Emden, Hanover, Zwickau and Neckarsulm in the 2030s,” he said in the memo, as reported by Reuters.
Even so, Blume indicated that he would rather avoid shutting factories if other options are available. He said he prefers “intelligent solutions” to plant closures and pointed to possible defence industry projects or the production of Chinese Volkswagen models in Europe as alternatives for underused facilities, reported Reuters.