New Delhi, July 14: Against the backdrop of declining profits, German car giant Volkswagen Group is looking to cut up to 100,000 jobs worldwide, almost double the number it projected earlier.
In an internal communiction publicised widely, the company’s Chief Executive Oliver Blume has said the Group’s costs were 20% higher compared to rival businesses, and it would need to reduce its outgoings even further.
Blume wrote in the memo, dated July 13, that the group must “act now” to safeguard its future.
“As half of our overheads stem from staff costs, a theoretical calculation, assuming no change in labour costs, would result in the loss of around 50,000 jobs,” he said.
The giant automaker suffered sharp decline in profits last year as a result of falling sales in key markets, as well as increasing competition from Chinese brands moving into Europe.
In 2023, it made an operating profit of €22.6bn ($25.8bn, £19.3bn). This dropped to €19.1bn in 2024, and then to just €8.9bn last year.
“We are currently assessing across all brands, companies and regions how many adjustments are actually necessary and feasible,” Blume said.
“We need to become more efficient, more robust and simpler. We must reduce our costs.”
He added the company had been “unable to confirm” alternative uses for four factories in Germany which have previously been threatened with closure.
Two of the plants, in Zwickau and Emden, are used for electric car production. But along with other factories in Hanover and Neckarsulm, they are seen as expensive to run.
The group has been badly hit by a fall in sales in China, once one of its most lucrative markets. In the first six months of the year they were down 26% compared to last year.
In the US, sales fell more than 7%, in part due to the impact of tariffs on car imports introduced by the Trump administration.
Last week saw widespread protests at Volkswagen sites across the country, ahead of a meeting of VW’s supervisory board, which includes labour representatives as well as company managers.
In late 2024, VW faced threats of mass strikes by the employees after which the company reached an agreement with the German trade union IG Metall to cut 35,000 jobs at its namesake brand by 2030, in a “socially responsible manner”, with another 15,000 jobs to go at its other brands.
The plans now under discussion appear to go much further.
Meanwhile Chinese brands have been moving aggressively onto international markets, introducing new technologies while benefitting from lower production costs than European rivals.
This has added to the pressure on established brands to keep their own costs under control, and slashed profit margins. (BVI)
