Volkswagen AG (VWAGY), Europe's biggest carmaker, may pursue less disruptive cost-cutting measures after Chief Executive Officer Oliver Blume suggested there are more effective ways to save money than closing factories. Blume said Volkswagen reduced costs at its German facilities by an average of 20% last year, describing the result as strong progress while emphasizing that further savings are still needed across the business. He noted that Volkswagen's vehicles remain popular, but the company is not generating enough profit from them, which may keep cost reduction at the center of management's restructuring efforts.
Blume's comments follow reports of a broader restructuring proposal that could involve as many as 100,000 job cuts and factory closures in Germany, developments that have increased tensions with Volkswagen's powerful labor representatives. Worker representatives control 10 seats on the supervisory board, and local media reported that 12 of the board's 19 members rejected the plan during a Thursday meeting in Wolfsburg. Volkswagen's works council said the way the proposals became public before the board discussion had caused a major loss of trust in Blume, adding that he would be expected to address employees after the summer break.
Management has so far outlined broader goals that include reducing complexity across Volkswagen's product range and focusing its lineup on the most attractive market segments. Blume said a more streamlined portfolio could help Volkswagen increase sales volumes per model, potentially improving efficiency without relying on factory closures. Investors may view the company's ability to deliver these savings as increasingly important as Volkswagen faces high labor and energy costs, regulatory burdens, stronger competition, weaker demand from China and US tariffs that have reduced returns at its Audi and Porsche luxury brands.