In a bid to implement radical changes, Volkswagen's cost-cutting efforts in Germany heavily rely on the established cooperation between managers and workers. While crucial for the company's survival in the face of weak demand and competitive pressures, the proposed job cuts and capacity reductions have sparked skepticism among investors and analysts.
The recent agreement between Volkswagen and workers' unions, reached just before Christmas, outlines individual cost reduction targets for each factory. Tasked with enhancing productivity, dedicated project teams comprising labor representatives and managers will collaborate to meet these targets, with progress reports scheduled for quarterly meetings.
This collaborative model reflects Volkswagen's tradition of cooperation and compromise, emphasizing incremental progress to avoid potential disruptive strikes. Concerns linger around the logistics of the massive job cuts and production capacity reductions, prompting uncertainty among investors and causing Volkswagen's stock to trade below previous levels.
Analysts like Patrick Hummel from UBS express doubts about the Company's ability to restore profitability in the long term, emphasizing the need for clarity on the strategic impact leading up to 2025. The core brand, Volkswagen, faces transformational challenges amidst discussions about potential factory closures and workforce reductions through retirement schemes rather than layoffs.
The agreement foresees the closure of the Dresden facility in 2025 and the Osnabrueck plant in 2027, with commitments to repurpose these sites. While Volkswagen plans to invest in new ventures like a recycling facility at the Zwickau plant, all investments are tied to meeting cost-cutting goals, as highlighted by the finance chief.
The uncertain path forward has divided opinions among industry experts, with questions remaining on how Volkswagen can effectively reduce fixed costs without shutting down entire plants. The company's strategy to decline interim targets while aiming for substantial savings in the "medium term" adds to the ambiguity surrounding the ongoing restructuring efforts.
Acknowledging the challenges ahead, analysts like Stephen Reitman question the effectiveness of Volkswagen's approach and the viability of shedding 35,000 jobs by 2025. Despite internal and external pressures, CEO Oliver Blume's proactive stance in driving change is recognized, highlighting the necessity for Volkswagen to adapt its cost structure and product offerings to sustain competitiveness and profitability in the evolving automotive landscape.