VW brand to shrink workforce further as profits fall

By BLOOMBERG

FRANKFURT • Volkswagen AG’s (VW) main car brand plans to deepen cost cuts and axe more jobs as profits slip in the industry’s shift to electric and self-driving cars.

The German carmaker said yesterday it will axe as many as 7,000 jobs — with measures including early retirement and not filling vacant positions — to achieve an annual profit gain of €5.9 billion (RM27.4 billion) starting in 2023.

“We will significantly step up the pace of our transformation so as to make VW fit for the electric and digital era,” VW brand COO Ralf Brandstaetter said.

The VW car brand, which accounts for about half of the group’s global deliveries, employs about 185,000 workers out of a total workforce of 650,000. Return on sales for VW’s namesake brand last year fell to 3.8% from 4.2% because of higher spending on future electric models and production bottlenecks triggered by stricter emission rules in Europe.

Labour costs are a “big concern” that risk derailing a much needed streamlining of operations, VW CEO Herbert Diess told investors on Tuesday.

Further measures will include lowering material costs and lifting productivity at its factories by 5% to achieve an operating profit margin of 6% in 2022.

CFO Arno Antlitz acknowledged that while the company has “higher goals” that reflect its superior scale compared to smaller, more profitable rivals like PSA Group, VW was sticking to the 6% target “in the mid-term” as the cost for the looming industry transformation weighs on earnings.

VW signed a labour pact in 2016 to cut 30,000 jobs worldwide and generate about €3 billion in annual savings.

The brand has achieved €2.4 billion in savings so far and a net reduction of more than 6,300 positions, despite adding 2,700 jobs including in software operations, VW said yesterday.

“We are on track,” Brandstaetter said.

For this year, the VW nameplate targets revenue growth of as much as 5% and an operating return on sales between 4% and 5%. It will boost investment in future technology to €19 billion through 2023, an increase of €8 billion.

VW will start producing the first model of its all-electric ID car range toward the end of this year. Orderbooks for the electric ID hatchback will open on May 8 and sales chief Juergen Stackmann said feedback from dealers is so strong that the model might be sold out before its official presentation in September.

“Our goal is to become the world’s number one in e-mobility by 2025,” Brandstaetter said. VW plans to bring to market more than 20 vehicles based on the ID’s fully- electric underpinnings and still intends to sell at least one million purely battery-powered vehicles by 2025, he said. — Bloomberg