In a bid to maintain competitiveness as the market shifts towards sustainability and full electrification, Volkswagen is set to roll out an earnings improvement program aimed at achieving a sustained contribution of $6.6 billion from 2023. These measures will supposedly include reducing complexity and optimizing material costs during manufacturing. VW expects this program to gradually start delivering results in the period from 2019 to 2022.
2019 marks a key year for VW, with investments totaling up to $21 billion throughout 2023 - $9 billion more than originally allocated. The sizeable investment will be undertaken using the brand’s own resources and will ideally mitigate the rising costs of more stringent CO2 and exhaust regulations over the following years.
"The measures from the earnings improvement program will enable our brand to achieve a competitive return level of six percent in 2022. This improvement is the basis for financing the necessary upfront expenditures for our transformation and live up to our strategic aspirations in the electric age," said Dr. Arno Antlitz, Volkswagen Brand Board Member for Controlling and Accounting, explained.
With this transition however comes a price beyond currency. VW expects to cut non-staff overheads and personnel requirements in administration by about 15% each – a result of having invested $5.2 billion in IT systems to perform administrative processes instead. This means that VW may cut around 5,000 to 7,000 jobs by 2023 thanks to the automation of administrative tasks.
On the flipside, Volkswagen is also considering not to lay off some of its workers. With that in mind, VW will probably go on the back foot with hiring and absorb the losses with possible staff retirements over the next four years. However, with the company projecting that 2,000 new jobs will be needed in Technical Developlent for electronics and software, Volkswagen may have to abide by its original plan and reduce its current workforce in order to make the EV push.
Ralf Brandstätter, Chief Operating Officer of the Volkswagen brand, said: “We have already achieved a great deal with the pact for the future: but there is still much more to do if we are to manage the challenges facing us beyond 2020 as well. We will significantly step up the pace of our transformation so as to make Volkswagen fit for the electric and digital era. Volkswagen is to become more efficient and agile and a more attractive and modern employer, especially in administration. Initial constructive talks with the Works Council on the planned implementation of the digitalization roadmap in the administrative areas of the company have already taken place.”