German auto giant Volkswagen is considering further aggressive cost-cutting measures, which could significantly impact the company’s headcount.
Volkswagen has been grappling with a slow transition from combustion engines to electric vehicles and declining consumer demand in Europe. Since last year, the manufacturer has embarked on a €10 billion cost-cutting drive, including a 20% reduction in “administrative staff costs.”
Now, they are contemplating closing factories in Germany. CEO Oliver Blume cites the challenges facing the manufacturing sector in Germany, which has struggled with negative growth in recent years.
“The economic environment has become more difficult, and new players are entering the European market,” Blume said in a statement on September 2. “In particular, Germany, as a production location, is falling further behind in terms of competitiveness.”
“In this context, we must act decisively,” he asserted.
Volkswagen remains a global powerhouse. It is the highest-ranked European company on the Fortune Global 500 list, with €348 billion in revenue and 9.24 million vehicles sold last year. However, the company struggles with low-profit margins and declining consumer sentiment.
Last year’s €10 billion cost-cutting agreement was a significant effort. They have had to continuously negotiate with the company’s unions to ensure that the cuts would be implemented in a “socially responsible” manner.
Last week, the German publication Wolfsburger Allgemeine Zeitung reported that Volkswagen offered employees a special bonus of up to €50,000 to agree to leave the company and receive a subsidy. This meant that some employees received up to €450,000 to depart.
However, the factory closures reflect a longer-term strategy by the company to reduce costs. For now, they will have to negotiate with the company’s unions, a task that falls to CEO Blume. This won’t be easy, as all three of Volkswagen’s previous CEOs failed in their cost-cutting efforts.
Volkswagen currently employs 650,000 people globally, including 300,000 in Germany.
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