Key Takeaways
- Volkswagen said Monday that the automotive giant is considering several cost-cutting options, including potentially closing at least one plant in its home country of Germany.
- CEO Oliver Blume said the company must “act decisively” as competition from other international carmakers has increased, making Europe’s market “even tougher.”
- The company said its Performance Program launched last year is no longer enough to meet the “enormous challenges” it faces.
German automotive giant Volkswagen (VWAGY) is considering significant cost-cutting measures to restructure amid an “extremely tense” economic situation as it faces increasing international competition and pressure on profits as it transitions to producing more electric vehicles.
Volkswagen Group CEO Oliver Blume said in a statement that the company is facing a “very demanding and serious situation” in Europe’s automotive market, meaning the company must “act decisively” to remain competitive.
The company said the Performance Program it launched last year, with a stated goal of creating 10 billion euros ($11 billion) in savings by 2026, is no longer enough to meet the “enormous challenges” it faces.
Global Competition, EV Shift Create ‘Extremely Tense’ Situation
The company behind a number of car brands from its namesake Volkswagen to luxury names like Audi, Lamborghini, and Porsche is considering ending a decades-old job security pact with German employees as it works to resolve an “extremely tense” economic situation.
“The goal must be to optimise product costs, material costs, and sales performance, as well as factory and labour costs,” the company said. “In the current situation, even plant closures at vehicle production and component sites can no longer be ruled out without swift countermeasures. The situation is extremely tense and cannot be resolved through simple cost-cutting measures.”
Unions and trade groups have spoken out against the statement, with the union representing the company’s German workers saying it would be prepared to fight any job cuts, the New York Times reported.