After intense negotiations, Volkswagen managers and employee representatives have agreed on key points in a paper for the ‘Accelerate Forward/Road to 6.5’ plan announced in June.

The 6.5 describes the key target, a return on sales of 6,5% for the core brand of the VW Group by 2026. It was first announced in June when VW announced the incoming savings program.

Another central point of the program, which will initially run for three years, is introducing administrative job cuts to reduce costs by 20%, not only at the VW brand but across the entire Group.

To achieve this, Volkswagen will offer termination agreements at all levels as required and maintain its hiring freeze. The positions that will be eliminated will not be filled or only in exceptional cases. The HR measures will take effect for Volkswagen AG from January 2024.

Accelerated R&D with lower cost

Volkswagen wants to shorten development and bring new models to market quicker, in 36 instead of 50 months. They should save more than one billion euros over the planning round up to 2028.

The brand will also reduce the number of test vehicles in Technical Development by up to 50%, as more can be done on test benches thanks to digitalization and technological progress. According to VW, this will save around €400 million per year.

Further measures include increased purchasing performance in procurement, which will enable savings of over €320 million per year, an optimized after-sales business, which is expected to generate more than €250 million annually, and the optimization of production times along the agreed location pacts, which is likely to save over €200 million each year. All of these measures already apply for 2024.

Better margins to pay for transformation

Thomas Schäfer, CEO of Volkswagen Passenger Cars, called the measures ” the most comprehensive program the brand has ever launched. ” Volkswagen is on track to execute this strategy with its current and future car models. We will now strengthen our economic foundation to support our success in years to come.

“Our efforts will, in part, bear fruit as early as 2024. This is crucial if we are to withstand the increasingly tough competition in extremely challenging market conditions,” he added.

Volkswagen, in particular, needs a lot of money for the transformation. With its high sales figures, the core brand has many EV models under development and must convert the plants within a few years. At the same time, the development of the company’s own battery production and the Cariad software division will cost billions more.

While other group brands, such as Audi and Porsche, are earning well in higher segments despite the transformation, the margin at the core brand has been in the 3,2 to 4,3% range since 2018 (except the 0,6% in the Corona year 2020).

For the current year, VW brand boss Schäfer is aiming for more than 4% before increasing to 6,5%. “Achieving this in 2026 is very ambitious,” he said, “but feasible if we pool our efforts.”