Volkswagen's Strategic Cost-Cutting Initiative

Volkswagen CEO Oliver Blume has declared a cost-cutting program essential to address the challenges posed by weak market demand in Europe and declining earnings from China. The initiative includes significant financial strategies such as a hiring freeze, partial retirement plans, and reduced bonuses for management. This approach aims to free up resources for investment in new vehicle development, crucial for the company's future.

Despite a slight increase in corporate revenue and orders in the third quarter, Volkswagen's operating results are under pressure due to high costs. The company plans to set aside 900 million euros to support these measures. Other strategies include potential wage reductions and changes to bonus systems, addressing overcapacity and structural issues that have persisted for decades.

The proposed cost reductions aim to make Volkswagen's German operations more competitive, as the labor cost level is significantly higher than the European average. The plan could involve closing at least three plants in Germany and reducing tariff wages by 10%. While the company sees these measures as necessary, unions are concerned about potential job losses and have threatened strikes in response.

Blume's strategy is flexible in execution but firm in its objective to reduce costs and enhance capacity utilization. The focus remains on maintaining a balance between cost efficiency and continuing to introduce new products that appeal to the market. Through these efforts, Volkswagen aims to navigate its current financial challenges while positioning itself for future growth.