Volkswagen Group plans to chop its global model range by as much as 50%, reduce production capability and simplify vehicle specifications as a part of a significant transformation designed to enhance competitiveness.
The proposals were presented to Volkswagen’s supervisory board as a part of a brand new “future plan” geared toward making the business more resilient within the face of weaker profitability, rising costs driven by tariffs, increasing regulation and growing competition from Chinese manufacturers.
Nonetheless, Reuters reported that wider restructuring proposals, including as much as 100,000 job cuts and the closure of 4 German factories, didn’t secure supervisory board approval after opposition from labour representatives.
Volkswagen’s official announcement from this board meeting on July 9 made no reference to potential plant closures or workforce reductions.
Under Germany’s co-determination system, worker representatives hold half the seats on Volkswagen’s supervisory board, giving unions significant influence over major strategic decisions.
Reuters reported that labour representatives rejected the more far-reaching proposals through the meeting, meaning negotiations over any future restructuring are expected to proceed.
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Model range to shrink
Volkswagen said its model portfolio can be regularly streamlined by as much as 50% and concentrated available on the market segments offering the best customer value and industrial return.
At the identical time, the corporate plans to cut back equipment complexity by as much as 75%, allowing engineering and development resources to be focused on fewer products and technologies.
Oliver Blume, chief executive of Volkswagen Group, said the corporate was entering the following phase of its transformation.
He said: “Our goal is evident: by 2030, we’ll make the Volkswagen Group probably the most attractive automotive company on this planet.”
Blume said the strategy centred on reducing complexity across the business, focusing investment on key technologies, aligning products and production more closely with regional markets, and removing excess production capability.
Blume said: “We’re making the Volkswagen Group faster, more resilient and more competitive through less complexity, focused technologies and the reduction of overcapacities.”
Volkswagen targets leaner global operations
Volkswagen is targeting annual production capability of around nine million vehicles across the group.
Before the Covid-19 pandemic, the manufacturer had capability for about 12 million vehicles annually and said further adjustments would follow in Europe and China.
The group also plans to harmonise vehicle platforms, electrical architectures and software systems across western and eastern markets to eliminate duplication, improve economies of scale and speed up technology development.
Volkswagen said increased use of digitalisation, artificial intelligence and shared services would help simplify structures and improve productivity.
VW must transcend existing cost reduction programmes
Arno Antlitz, chief financial officer of Volkswagen Group, said the corporate needed to transcend existing cost reduction programmes.
He said: “Despite the progress achieved, the price reductions planned up to now under the agreed programs will not be sufficient in the present economic and geopolitical environment.”
Antlitz said Volkswagen needed to fundamentally realign its business model by lowering vehicle costs, improving plant efficiency, accelerating technology development and simplifying decision-making.
He added: “We will only achieve this by substantially reducing complexity in our product portfolio and technology platforms, the variety of units and decision-making levels.”
Volkswagen has not identified which models or brands could possibly be affected by the planned rationalisation, nor indicated any impact on individual markets.
For the group’s UK dealer network, a smaller global model portfolio would eventually result in a more focused showroom range, although any changes are prone to be introduced regularly as future product cycles are planned.
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