Volkswagen prepares for a massive cost-cutting plan

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Europe’s biggest car maker, Volkswagen, plans a massive cost cut as profit figures dive southward. The company faces a battle with workers over the cost cuts at its biggest car division.

While addressing more than 20,000 workers at company’s base in Wolfsburg, Germany, Volkswagen’s CEO Martin Winterkorn called for swift results while outlining an efficiency drive which involved ceasing the production of less profitable models and reducing the investment in research and development.

Winterkorn said, “Over the short-term, we urgently need more efficiency and higher profit. Without an appropriate financial basis, any strategy must and will fail.”

The company reported a profit figure of 2.9 percent as oppose to healthy profit figures reported by Toyota and Hyundai Motors at 8.8 percent and 9.5 percent respectively. Winterkorn aims at raising the profit figure to about five billion euros per year from 2017.

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“Management and staff at VW have had cozy ties for quite a few years. That may be coming to an end now. In difficult times, one will find out how resilient those ties are,” said Stefan Bratzel, head of the Center of Automotive Management think-tank near Cologne.

However, this plan needs a green signal from Volkswagen’s works council which also has a say in the supervisory board to represent labours. The works council is not likely to support this strategy.

VW works council Chief Bernd Osterloh said, “What’s now at stake is how we will together with management achieve the target.”

The management and the works council will have to find a middle way to get things sorted and make strategies to increase profits. What should be the company’s strategy according to you? Share your opinions through comments below.

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