According to sources talking to the specialized German newspaper Handelsblatt, Volkswagen Group CEO Oliver Blume is preparing the biggest reorganization in the group’s history. A severe cost-cutting exercise is needed to remain competitive with the new Chinese players in the market and Tesla, for example.

Lately, Volkswagen has been surpassed by BYD as the most important car seller in China, and its selling margins are put under pressure by the competition. Tesla started the price reduction in China, and brands like Ford and Mercedes followed.

Volkswagen isn’t very keen on following this ‘race to the bottom’, but pressure builds up. That’s why the new plan foresees cost-cutting everywhere, but especially in the so-called volume brands. Seat, Skoda, and Volkswagen itself have to raise their profitability by €3 billion.

No major job cuts

To realize this, there won’t be major job cuts, say the sources, but R&D will have to rationalize, and production will have to be leaner and more efficient. Perhaps the biggest impact will be on the suppliers because VW plans to cut in the abundance of models and to purchase less from outside.

The Volkswagen Group is one of the biggest car manufacturers in the world, employing +200 000 people worldwide (and some 120 000 in Germany alone), but sales have been diminishing in recent years.

A few years ago, it competed every year with Toyota and others to be the world’s number one, but sales are now the lowest in ten years. Fortunately, the shift to better-equipped and bigger models has still increased profitability, but this was more the case for the premium and luxury brands inside the group.

Today, CEO Oliver Blume presents his plan for reorganization to the VW Group board; on the 21st of June, an official and more detailed release should follow as Blume will then talk to VW investors and shareholders.