VW group’s flagship brand targets €10bn cost cuts by 2026

Volkswagen’s flagship brand aims to cut €10bn in costs by 2026 as the German carmaker fights to boost earnings in an increasingly competitive market. 

Arno Antlitz, chief financial officer of the entire VW group, posted on LinkedIn on Wednesday that the brand would “streamline” its product range and cut manufacturing capacity in order to hit a margin target of 6.5 per cent. The margin for the first three months of the year was 3 per cent.

Antlitz said the group was now “focusing more strongly on profitability and cash flow” in order to secure long-term investments. 

VW expects the cost cutting programme to start by October this year. The company is planning to cut costs by producing cars for some of its volume brands, which include Cupra, Škoda and Seat, in the same factories. Some poorly-performing brands, such as VW’s Arteon, will be discontinued.

VW is facing challenges on several fronts, including sliding market share in its largest market, China, growing competition from Chinese rivals in Europe as well as increasing costs associated with the transition to electric vehicles.

The group will next week hold a capital markets day when new chief executive Oliver Blume is expected to announce wide-ranging cuts, especially at its headquarters in Wolfsburg. 

In a separate statement, Thomas Schäfer, chief executive of the VW brand, said its cost saving programme was “the number one priority for the entire board of management”.

A spokesperson said it had not yet been decided how savings would be allocated and how earnings would be affected.

The German carmaker in March committed €180bn in investments over the next five years as the group plans to manufacture its own batteries and battles for market share in the US and China. 

The new cost-cutting plans were approved by VW’s powerful works council, representing employees. The company has a large workforce, which is closely guarded by Germany’s strong trade unions.

“We all agree that we need to achieve the targeted savings without reducing collectively agreed wages or shedding jobs,” the chair of VW’s works council Daniela Cavallo said in a joint statement with the company.