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According to a number of media reports, including the German business newspaper, people familiar with the matter said that the German Volkswagen board has drawn up a plan to seek a series of cost-cutting measures for its underperforming passenger car brands. these include a 10 per cent pay cut for all staff, a suspension of wage increases for the two years after next year, and the closure of some German factories with the goal of saving 4 billion euros.

As of press time, the official did not respond to the above news.

As the world's second largest automaker, Volkswagen Group, founded in 1938 and headquartered in Wolfsburg, Germany, is the largest car company in Europe and one of the first foreign car companies to enter the Chinese auto market.

Industry insiders believe that Volkswagen's cost-cutting may be related to its declining sales and poor market performance. Volkswagen Group's cumulative global sales in the first three quarters of this year were 6.5243 million vehicles, down 2.8 per cent from a year earlier, according to data. Of this total, Volkswagen brand passenger car sales totaled 3.3968 million, down 2.5 per cent from a year earlier. In the market segment, the Chinese market accumulated sales of 2.0566 million vehicles, accounting for 31.5 per cent of global sales, but the market fell sharply, down 10.2 per cent from a year earlier.

According to the financial report, Volkswagen Group's revenue rose 1.6% to 158.8 billion euros in the first half of this year compared with the same period last year, while operating profit fell 11.4% to 10.1 billion euros. At the end of last month, Volkswagen lowered its full-year performance forecast for this year to 9 million vehicles, lower than the previous forecast of growth of up to 3% from 9.24 million vehicles in 2023; sales are expected to fall 0.7% to 320 billion euros, initially expected to increase by up to 5%; the projected operating return on sales (ROS) is 5.6%, down from 6.5%. The auto sector is expected to have a net cash flow of 2 billion euros, down from 2.5 billion-4.5 billion euros.

Volkswagen has been exposed to layoffs many times during the year. In the middle of last month, it was revealed that Volkswagen China would cut hundreds of employees in an effort to meet its goal of reducing global management costs by 20 per cent over the next three years. Volkswagen said the move was part of its global efforts to reduce costs, but did not disclose the number of layoffs. On the 10th of this month, there were also media reports that Volkswagen's layoffs in China were still in progress, with nearly 100 layoffs, mainly related to the imported car business, involving Volkswagen imported Automobile (China) sales Company (VGIC). Volkswagen China explained that the move is part of its global efforts to reduce costs, and the company is continuing to improve the efficiency and optimize costs of its departments and projects. According to the actual situation, the relevant measures also involve direct manpower costs and indirect manpower costs, including administrative expenses, travel expenses and training costs. "

Earlier, on Sept. 2, Volkswagen said it planned to close two German factories, including a larger car factory and a parts plant, involving Volkswagen's major passenger car brands. this will be the first time Volkswagen has closed a plant in Germany since it was founded in 1926, and the closure and forced layoffs of local factories will be completed by 2026. The reason behind Volkswagen's plan to close two German plants is to solve the problem of overcapacity and declining competitiveness in order to reduce costs and increase efficiency.

On Sept. 10, Volkswagen announced that it would end a series of job-guarantee agreements with unions, which were supposed to protect jobs until 2029, but will now end early in the middle of next year. Oliver Blume, chief executive of Volkswagen, said Volkswagen must take further steps amid a difficult economic environment, industry competition and the weakening competitiveness of Germany as a manufacturing hub.

On the whole, Volkswagen is still the second largest carmaker in the world, but with the reshuffle of the auto industry, many traditional automakers are under great pressure due to falling market demand and high investment in electrification. As a result, Volkswagen is reducing costs and increasing efficiency through measures such as layoffs, and Volkswagen is facing challenges, especially in the Chinese market. It should be noted that cost reduction does not necessarily mean that it can increase efficiency. Nowadays, the competition in the automobile market is already quite fierce. Whether Volkswagen's decision can bring growth is still uncertain.

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