Volkswagen Job Cuts to Help Save Flagship Brand $4.37 Billion Next Year -- 2nd Update
December 19 2023 - 12:01PM
Dow Jones News
By David Sachs and Joshua Kirby
Volkswagen has reached a deal with workers that will help its
flagship brand save up to 4 billion euros ($4.37 billion) next year
by reducing the size of its workforce.
The German carmaker said Tuesday that it aims to cut
administrative staff costs at the Volkswagen brand by 20% as part
of a restructuring meant to slash group costs by EUR10 billion.
With the move, the brand aims to reach a 6.5% profitability target
by 2026 and contribute earnings of EUR10 billion by that same year,
it said.
Volkswagen won't carry out any compulsory redundancies, part of
a deal with workers excluding such measures until 2029. The brand
will instead extend its partial retirement plan to staff born in
1967 and maintain a hiring freeze, it said. Volkswagen said it
isn't targeting a specific number of job reductions, but rather the
number necessary to reach the 20% savings target.
Staff reductions will start in January, the carmaker said. Other
measures include cuts to development times and procurement
improvements.
High labor costs have long been seen as a headache for
Volkswagen. Cost-cutting is urgent at the group, Citi analysts said
after reports of the job-reduction scheme were first set out in the
German press last month. "VW needs to act urgently," Citi said. "It
is starting to act more urgently."
A week ago, HSBC analysts said in a note that progress on cost
cutting has been slow, suggesting tough negotiations with labor
unions.
Analysts expect the Volkswagen brand's earnings before interest
and taxes to come in at EUR3.06 billion this year before falling to
EUR2.28 billion in 2024, according to consensus estimates provided
by FactSet. Last year, the brand posted EBIT of EUR2.65
billion.
The job cuts come as the United Auto Workers union in the U.S.
is recruiting workers at the company's Tennessee plant to unionize
for higher wages.
Write to David Sachs at david.sachs@wsj.com and to Joshua Kirby
at joshua.kirby@wsj.com; @joshualeokirby
(END) Dow Jones Newswires
December 19, 2023 11:46 ET (16:46 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
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