The Volkswagen brand is looking to slash costs, and as part of these efforts, it plans to reduce its workforce in order to achieve significant savings. According to an internal memo, the company is aiming to reduce its administrative staffing costs by as much as 20 percent.
The automaker maintains that it will not start mass layoffs, but that it will instead trim its staff via partial and early retirement. The measure is part of a wider cost-cutting effort to save €10 billion (about $10.8 billion USD at current exchange rates) by 2026.
“What is crystal clear is that we will need to operate with fewer people in many areas at Volkswagen in the future,” VW brand CEO Thomas Schaefer told employees in an internal memo seen by Reuters. “This doesn’t mean more work for fewer people, but rather shedding old habits and saying no to duplicating efforts and inefficiencies.”
Read: “We Are No Longer Competitive,” Says VW Boss
The cost-cutting measures coincide with a period of reduced production output. For example, Daniela Cavallo, the head of VW’s works council, noted that production at its central plant in Wolfsburg has significantly lagged behind historical averages. As of now, only 453,000 vehicles have been manufactured at the factory in 2023. With just a month remaining in the year, it is unlikely to reach the annual average of 780,000 vehicles achieved between 2010 and 2020.
Similar to other automotive brands, VW has been grappling with declining demand for its vehicles in both the European and Chinese markets. Furthermore, rising inflation, along with elevated labor and energy costs, has added to the challenges facing the automaker.
Volkswagen says it won’t just look to shrink its employee pool in response to these difficulties. It has also scrapped plans for an €800 million (about $860 million USD) R&D center in Wolfsburg, according to the same memo. It is also planning to shorten product cycles from 50 to 36 months, and will cut overall production times, in an effort to increase demand for its vehicles.
