Volkswagen Group CEO Oliver Blume presented its vast reorganization plan for the group on Wednesday at the group’s Capital Markets Day. A severe cost-cutting exercise is needed to remain competitive, and the group wants to increase electric sales in China and the U.S.

“If the bulk of our revenues still comes from Europe, the growth for the future has to come from China and the U.S.,” Blume declared yesterday. “We will concentrate on our margins and will privilege value before volume.” The boss thinks about operating margins of 9-11% by 2030, whereas it was 8% last year.

To realize those ambitious goals, Volkswagen is also counting on increasing its sales by 5 to 7% annually until 2027.

Cost reduction

In the global transformation plan Blume presented, cost-cutting is of major importance. “We will focus on profitability, reducing fixed costs, and generating a decent cash flow. Factories will have to be more efficient and production processes leaner.”

Last week, Blume communicated that the largest part of this reorganization concentrated on the ‘generalist’ brands within the group, Seat, Skoda, and, of course, Volkswagen itself. Also, now, he didn’t go into detail if this cost-cutting implemented job losses.

China and the USA

Last month, Volkswagen was overtaken by BYD as the most important car manufacturer in China, but the VW Group definitely wants to stay ” the most important foreign manufacturer” and increase its 15% market share over there. Sales in China still represent 40% of total Volkswagen sales worldwide.

Blume admits that the Chinese market is a big challenge, especially because of “the speed with which technology is evolving over there and the great number of emerging competitors.”

“But we have an advantage over these newcomers,” Blume reasons. “We are still very strong in selling ICE cars, and the cash we generate from this will be very important for the investments in the future.”

In the margin of his ‘Chinese intervention’, Bluma also indicated that he wanted an “independent and transparent audit ‘ of VW’s plant in Xinjiang, accused of forced labor practices and discrimination against the Ouighour minority in the region.

Talking about another big market for Volkswagen, CFO Arno Antlitz has assured  that ” Volkswagen has all the right ingredients for an important growth strategy in the U.S. market, as well on the technology side as the financial aspects.”

Digitalization

A few months ago, Volkswagen already announced that it was going to reorganize its Cariad daughter completely. The brainchild of Blume’s predecessor Herbert Diess has caused a lot of software troubles within the group, even resulting in postponing the launch of many models, for example, the all-important Audi Q6 e-tron and the electric Porsche Macan.

The problems with the software department within the group created to be less dependent on suppliers in this area of ever-growing importance have, in fact, led to the demise of former group CEO Herbert Diess who had promised that he would personally oversee Cariad and solve the recurring difficulties.