Volkswagen’s main car brand plans to deepen cost cuts and axe 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 — to achieve 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% from 4.2% 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 on Tuesday. 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% to achieve an operating profit margin of 6% in 2022.
Chief financial officer Arno Antlitz acknowledged that while the company has “higher goals” that reflect its superior scale compared to smaller, more profitable rivals like PSA Group, VW was sticking to the 6% target “in the mid-term” as the cost for the looming industry transformation weighs on earnings.