Volkswagen sees ‘painful’ cost cutting as profit cuts .

Volkswagen Faces Critical Challenges Ahead

The German automotive giant Volkswagen, which encompasses brands like Seat, Skoda, and Porsche, is grappling with escalating production costs and a sluggish transition to electric vehicles. Increased competition, particularly in the Chinese market, has exacerbated the crisis.

Urgent Action Required

Volkswagen’s finance chief, Arno Antlitz, emphasized the necessity for immediate action, stating, “We need to step up our efforts to stay competitive. Any delay would be irresponsible.” The company is contemplating a historic cost-saving initiative, including potential factory closures in Germany.

Job Cuts and Pay Reductions

Labor representatives have warned that at least three VW plants could be at risk, with thousands of jobs on the line and remaining employees facing a 10-percent salary cut. Antlitz described the situation as “serious,” indicating that the savings proposals are critical for the core VW brand, which reported a mere two percent operating profit margin in the first nine months of the year.

Declining Deliveries and Market Pressures

Global vehicle deliveries dipped seven percent in Q3, with a 15 percent decline in China overshadowing growth in North America. The company also noted a 10 percent drop in battery electric vehicle deliveries, amidst rising fixed and restructuring costs.

Future Negotiations

As Volkswagen navigates these challenges, it has initiated a second round of discussions with the IG Metals union, which is advocating for a seven percent pay increase. Labor leaders are prepared to resist any plant closures, raising the possibility of strikes in December.