Volkswagen (VWAGY) to Slash Headcount in Cost-Saving Efforts
Volkswagen VWAGY will cut jobs as a part of its $11 billion cost-savings program. Per Thomas Schaefer, CEO of Volkswagen Passenger Cars, the automaker’s increasing costs and low productivity are making the cars uncompetitive.
The automaker has held talks with its works council over a cost-cutting scheme for its Volkswagen brand to boost efficiency.
Per Reuters, Schaefer told his staff that because of most of Volkswagen’s pre-existing structures, processes and high costs, the company is no longer competitive as Volkswagen brand.
The company had previously said that it would rely on the demographic curve to manage its workforce. This meant it would wait for employees to retire while slowing down hiring instead of cutting jobs. The company pledged to not dismiss any of its employees until 2029.
Per Gunnar Kilian, a member of the board at Volkswagen, the job cuts will be achieved through partial and early retirement agreements with employees.
The exact number of employees that will be affected by the job cut is not known.
Apart from job cuts, Kilian added that the cost-saving goal would involve other measures, which would be disclosed by the end of the year.
Per Kilian, the company needs to be brave and honest enough to discard things that are being duplicated within the company and things that are not required to achieve desired results.
In the third quarter, Volkswagen registered a significant increase in the sales volume of passenger cars, which had a positive effect. However, the same was offset by costs related to the production disruption of a supplier and higher product costs.
Zacks Rank & Key Picks
VWAGY currently carries Zacks Rank #4 (Sell).
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