Volkswagen in Germany has warned its employees that they will be facing a wave of job cuts. The company is fighting the same high costs, low productivity and other problems that plague the German economy.
It is believed that the carmaker has plans to cut thousands of jobs as part of its program to reduce outgoings to EUR10bn over three years. However, no specific target has been established.
Volkswagen is fighting a lower demand for electric vehicles (EVs), because they are more expensive upfront than combustion alternatives.
VW managers informed their staff on Monday of plans to reduce the number of jobs.
VW could reduce its workforce by early retirement, as it has a large number of employees who are due to retire.
Daniel Roeska is an analyst with Bernstein. He said that the company could cut its design department after outsourcing the design of the Scout to Magna Steyr.
could be cut on the production line in the long term. Making an EV requires assembling fewer components. VW, however, may follow Mercedes and bring more production from suppliers within the company to avoid redundancies.
Our initial expectation was that the cuts would be more pronounced for non-German jobs. “But that won’t really solve the problem of costs too much,” said he.
The German economy shrank during the three-month period ending September.
The country’s Statistics Office reported a 0.1pc decline in production due to high energy costs, high borrowing costs and low consumer demand.
In September, factory output in Germany, Europe’s manufacturing leader, dropped to a 3-year low, due to weak auto production.
The production of carmakers and their suppliers dropped by 5pc, resulting in a 1.5pc drop compared to August. This is the lowest level since 2020.
Germany’s carmakers suffer from slower demand. Particularly for electric vehicles. Buyers’ incomes are squeezed as a result of higher bills due to soaring prices in energy and by the increased interest rates that central banks have imposed to combat inflation.
Last month, German luxury automaker Porsche announced that rising borrowing costs and prices are even beginning to bite their wealthy customers.
In recent years, China has become an increasingly important market for luxury automakers. Porsche, a Volkswagen-owned company, saw its sales in China drop by 12pc in the first nine month of the year.
Mercedes issued a similar warning saying that electric carmakers are facing a “brutal market” as competitors cut their prices and their wealthy customers tighten up their belts.
It claimed that its profit margins had shrunk as it was forced to lower prices, while its costs, including wages and raw material costs remained high.
Volkswagen spokesperson said: “The Volkswagen Brand has launched an ambitious Performance Program, and employee representatives are participating in its development.
“As a consequence, all costs will be analysed critically. The company will continue using the potential for personnel development in line with the demographic curve, as it has been proven during the transformative process. Volkswagen has no target to reduce the number of its employees.