- Volkswagen amplifies its cost-reduction strategies – sluggish demand constraints budget.
Volkswagen, EU's largest car manufacturer, is reportedly contemplating amplifying its cost-saving initiatives within its flagship brand, VW. As per a Handelsblatt report based on insider info, the 2023 efficiency plan demands sharper attention due to the company's earnings failing to meet anticipated benchmarks. The report suggests a deficit of around 2-3 billion euros in the projected profit improvements. Volkswagen chose not to comment on this matter.
The intensified cost-reduction strategies are slated for discussion at VW's regular management meeting in Isenbüttel, close to Wolfsburg, on the following Monday, according to DPA news agency. The brand's CEO, Thomas Schäfer, had previously offered an update on these cost-saving endeavors at the group's management conference last week. The current sluggish new business is presenting a significant hurdle. To achieve the projected profit enhancements, expenditures will now require more substantial reductions than initially projected.
Schäfer had already mentioned earlier in August that more intense cost-saving measures were necessary in response to the underwhelming business performance. "We need to further decrease our fixed costs to maintain our trajectory in this hard market situation," he explained while presenting the half-year results. "The extra resistance is undeniably evident in our figures, particularly with regard to the Volkswagen brand." The existing cost-reduction initiatives were inadequate, he pointed out at that time.
With the 2023 efficiency plan, the profit-strained core brand aims to drastically reduce expenditures. This year, it targets improving the core brand's outcome by 4 billion euros, and achieving a 10 billion euro improvement by 2026. The return on sales is planned to increase from the current 2.3% to 6.5%. As per previous declarations, significant savings are planned for material and fixed costs. To lessen personnel expenses, Volkswagen is employing separation packages and early retirement options. The company has explicitly denied the prospect of forced layoffs.
At the upcoming management meeting, Volkswagen (VW) is set to discuss further amplifying its cost-saving strategies, as reported by DPA news agency. Regarding the 2023 efficiency plan, VW's CEO, Thomas Schäfer, has acknowledged the need for more substantial reductions in expenditures due to the brand's sluggish new business.
