Volkswagen brand chief says VW ‘no longer competitive’ and cost cuts are needed

Staff photo by Matt Hamilton / Visitors applaud during the launch celebration for the Volkswagen ID.4 electric SUV at the Chattanooga Volkswagen Assembly Plant in 2022.
Staff photo by Matt Hamilton / Visitors applaud during the launch celebration for the Volkswagen ID.4 electric SUV at the Chattanooga Volkswagen Assembly Plant in 2022.

Volkswagen's brand chief said Monday the carmaker's original brand is "no longer competitive" because of high costs and low productivity.

"With many of our pre-existing structures, processes and high costs, we are no longer competitive as the Volkswagen brand," Thomas Schaefer told staff during a meeting at Volkwwagen's headquarters in Wolfsburg, Germany, according to a post on an internal company site cited by Reuters news service.

In public presentations, VW has said it is trying to improve the performance of all its mainstream brands and is working to cut wasteful spending.

"We need to finally be brave and honest enough to throw things overboard that are being duplicated within the company or are simply ballast we don't need for good results," Kilian said in a report cited by CNN.

Volkswagen, which is one of the world's biggest carmakers, said it is negotiating with its works council over cost-cutting measures at the VW brand as it seeks to boost efficiency in its transition to building more electric cars.

(READ MORE: Volkswagen sales of ID.4 up 60% this year)

Volkswagen Group owns several brands, including Porsche, Audi and its original brand Volkswagen, founded in 1937. The VW brand had the highest sales volumes but the lowest operating profit margins during the first three months of this year, according to a corporate presentation.

Michael W. Lowder, a spokesperson for Volkswagen Group of America, said in a statement Monday there is no total target for reducing the number of employees at Volkswagen. But he said VW "has launched an ambitious performance program with employee representatives directly involved in its development" to increase the operating profit margin to 6.5% by 2026.

"The planned sustainable increase in performance of 10 billion euros ($10.9 billion in U.S dollars) by 2026 is to be achieved with reduced fixed and production costs, cross-divisional performance improvements and optimized product and material costs," Lowder said. "As a result, all costs and areas will be critically analyzed."

In Monday's meeting, human resources board member Gunnar Kilian said VW is looking at agreements on partial or early retirements, according to a CNN report.

However, the bulk of the savings goal would be achieved through measures other than staff reductions, Kilian added. CNN reported that the full details of the cost reductions should be defined by the end of the year.

In Chattanooga, Volkswagen's assembly plant has more than 5,000 employees and VW is now the third largest employer in Hamilton County, according to the Chattanooga Area Chamber of Commerce.

Last week in the wake of the United Auto Workers contract settlement with GM, Ford and Stellantis, Volkswagen announced it will provide an 11% pay raise for production workers at the automaker's Chattanooga assembly plant.

The 11% raise will come immediately and in full, according to VW. Starting wages at the Chattanooga plant are now $23.42 an hour, rising to a maximum of $32.40, the company said.

Earlier this year, Volkswagen Chattanooga revealed plans to hire more than 500 additional workers. The Enterprise South industrial park plant now employs about 5,000 people. The sprawling factory builds the ID.4 electric SUV as well as the conventionally powered Atlas and Atlas Cross Sport SUVs.

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