Volkswagen CEO urges drastic cuts as profit dips and costs soar

Volkswagen Passenger Cars’ CEO has issued a no holds barred warning to senior managers requesting urgent cost saving after proclaiming the automaker’s “roof is on fire”.

Cuts now

In an impassioned one-hour speech this past Friday, Thomas Schäfer said costs have been become too high and that measures need to be drawn-up quickly in order for Volkswagen to achieve its €10-billion (about R200-billion) savings mandate set out by its “Accelerate Forward | Road to 6.5” product strategy.

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Describing the carmaker’s current situation as “very tough”, former Volkswagen South Africa boss Schäfer was quoted as saying that “the roof structure is on fire. This is the final wake-up call”.

Why the need?

According to Britain’s Autocar, the reasons stem from apparent structural issues said to be “too slow and complex”, as well as sagging sales in China due to renewed competition from domestic brands.

Last month, Wolfsburg confirmed it will not renew the Arteon for a second generation as a result of poor sales, in addition to focusing on its electrification ramp-up before 2030.

“We will focus on a small number of – though genuine – Volkswagen core models. This will reduce complexity and deliver higher profits,” Schäfer said in a statement announcing the decision.

He also poured cold water soon after about the prospects of Volkswagen bringing back the Beetle and Scirocco nameplates as EVs, saying, “there are certain vehicles that have had their day. It wouldn’t make sense to bring it back”.

Up and down sales

Asking senior managers to find cost cutting measures he described as “small wins”, Schäfer admitted that “all is at stake” for Volkswagen as it grapples with the mentioned costs and a reported profit of only three percent.

The call to save costs comes on the back of the Volkswagen Group reporting a 48% year-on-year increase in the sale of its electric vehicles from 217 200 to 321 600 units during the first six months of this year.

While the highest in Europe, deliveries of electric vehicles in China dipped two percent to 62 400 as a result of “a particularly competitive market environment”.

For now, it remains unknown as to whether the call to cut costs involves South Africa where Volkswagen has remained steady as the country’s second best-selling marque behind Toyota with monthly sales of more than 5 000 vehicles.

Local operations have, nonetheless, not been easy as a result of the ongoing energy crisis that resulted in production numbers dropping by 30 000 units last year.

“We lost market share because we were short in supply [and as a result] we built 30 000 fewer vehicles at our plant than we could. So, the focus area is to gain back our market share in South Africa,” Volkswagen South Africa Managing Director Martina Biene told radio station Algoa FM in March.

Additional information from carscoops.com.

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