VW on saving course to secure future investments

The Volkswagen Group is planning a billion-euro savings program for its core brand VW to bolster profitability and generate money for investments in the energy transition. The group will present its overhaul plans to investors at a conference on 21 June.

According to the German newspaper Handelsblatt, the program could increase annual results by at least €3 billion. And it could bring even more as the company assesses a realignment of the model range. These measures include new models and dovetailing production with the group’s sister companies Skoda, Seat, and VW Commercial Vehicles.

Aligning to platforms

“We see that our brand, for all its strengths,  is not yet solid enough positioned economically,” VW brand CEO Thomas Schäfer said in an internal letter to employees. He added that by combining production with the above-mentioned brands, the carmaker could save up to one billion euros annually.

“We are aligning our plants not according to brands but according to platforms. This then determines which models are produced there. Not the other way around,” Schäfer announced.

The program explicitly does not involve job cuts, the paper reported from company circles. However, the carmaker would need fewer employees in the long run as the company is switching to EVs, which are less complex to produce. Job reductions would be regulated by partial retirement and a non-replacement of jobs.

Reinvesting and restructuring

But VW not only needs to save money – it also needs to reinvest. For instance, ramp up US production to compete with local manufacturers. In China, too, the company’s turnover is shrinking.

Meanwhile, brand boss Schäfer lowered his target for the operating return on sales to “more than four percent”. In the first quarter, the VW brand had only brought in a 3% return on sales. It is still being cross-financed with profits from Porsche and Audi – but this should not be a permanent state of affairs, says Handelsblatt.

In Germany alone, the VW brand employs around 120 000 people in and around its nationwide plants. Most recently, it delivered 4,5 million cars, which is almost half of the group’s total sales.

The restructuring of other VW Group subsidies has already begun. At the beginning of May, VW Group CEO Oliver Blume replaced almost the entire board of the IT subsidiary Cariad. The software unit’s problems have delayed product launches at Audi and Porsche by years.

Recently, Seat announced that it will become a global mobility provider by 2030 and that the car business will be run by its more sporty and slightly upmarket daughter Cupra.

Russian interests sold

Meanwhile, Volkswagen Group has also completed the sale of its shares in Volkswagen Group Rus LLC – including its local subsidiaries Volkswagen Components and Services LLC, Scania Leasing LLC, Scania Finance LLC, and Scania Insurance LLC – to Art-Finance LLC, which the Russian Dealer Avilon supports.