Volkswagen has plans to cut costs of 3 billion Euros ($3.4 billion) for speeding up its profit margins improvement at the core VW brand.
The 2015 scandal of emissions test cheating has affected it badly and it is still trying to recover from it. The German automaker is making an ambitious shift to automated driving and electric cars and has been cutting cost to raise funds for it.
The automaker’s key goal to improve its mass-market VW brand margins which is the largest division by increasing sales, but it is lagging behind in profits when compared to its rivals like Japan’s Toyota. The high cost of labor employed at its German plants is one of the reasons behind it.
Board member Arno Antlitz said that the company will achieve 3 billion Euros when it comes to cost savings by 2020 and they also have aim of achieving further 3 billion Euros in cost savings by 2023.
This will help the brand to increase its profit margin at least by 6% till 2022, earlier than it had previously planned. The company has planned to raise the plants’ productivity by 30% by reducing its administrative expenses and cut off the complexity from the brand’s model line-up.
There were no details regarding the job cuts by the company, but there will be no forced redundancies. The brand has already initiated talks with labor leaders regarding its plan and had constructive discussions.
The brand has plans to invest around 11 billion Euros in digitalization, electric vehicles, mobility services and autonomous driving by 2023. There are also talks over U.S. rival Ford potential alliance and more details regarding the same will be released by next year. The firm is still exploring opportunities of potential cooperation for autonomous and electric cars.
Source: Reuters and World News Explorer