After months of struggle with the works council, the car manufacturer VW has agreed on the key points of a billion-dollar savings program for the core Volkswagen brand. Personnel costs in administration should therefore fall by 20 percent. However, there will be no operational layoffs, the company announced on Tuesday.
The program is expected to improve earnings by four billion euros as early as next year, and by 2026 this should reach ten billion euros per year. VW wants to achieve the greatest savings in material and fixed costs. The return on sales should then increase from 3.4 to 6.5 percent. Since the beginning of October, negotiations have been underway with the works council about the design of the savings program. “In the last few weeks we have taken a big step forward in designing the most comprehensive program that the brand has ever set up,” said VW brand boss Thomas Schäfer. “The agreement with the employee side is an important step in order to be able to quickly continue on the path we have chosen.”
Works council head Daniela Cavallo said that the jointly defined course would strengthen competitiveness in the long term without being one-sidedly at the expense of the employees. “We did not allow collective bargaining cuts or compromises in our job security.” The previously agreed job security will remain until 2029. According to Cavallo, the majority of the savings will now take place outside of the personnel area. In addition to material and fixed costs, it also involves sales and product development. The development time for new models should be shortened to 36 months.
VW opens partial retirement for younger employees
VW left it open how many jobs would be eliminated. It’s not about heads, but about costs, said a spokesman when asked. In order to achieve the goal without layoffs, partial retirement should be expanded. Specifically, the point is that those born in 1967 will also be able to take advantage of partial retirement from January 2024. “In addition, if necessary, we will offer selective termination agreements at all levels,” added Human Resources Director Gunnar Kilian. The hiring freeze that has been in place since the beginning of November will also remain in place.
VW had already exhausted options in recent months to save personnel costs. Because demand for electric cars has been low for months, the car manufacturer has let hundreds of temporary workers’ contracts at the Zwickau plant expire, and others are on the brink. “The year 2024 is likely to be very challenging,” said works council leader Cavallo on Tuesday. The federal government’s funding stop for electric cars is likely to be particularly painful for the people of Wolfsburg. The group announced that it would also cover the federal share of the premium for cars already ordered and cars registered until the end of March 2024, which is likely to significantly reduce the already low profit margin on VW’s electric vehicles.