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Volkswagen’s chief executive has confirmed in an internal memo plans to axe 50,000 jobs, underlining his determination to cut costs despite opposition from the carmaker’s supervisory board.
The memo to staff from Oliver Blume was the first time the CEO had addressed the possible additional cuts, which would bring the total to 100,000, potentially making it one of the largest job-cutting programmes in corporate history.
VW’s supervisory board met on Thursday where its directors failed to agree on the radical staff reduction plans owing to strong opposition from union representative members. However, following the board meeting, the company announced a 50 per cent reduction in the group’s model range, while discussions over the job cuts are set to continue.
Volkswagen faced a disadvantage of about 20 per cent in overhead costs compared with comparable companies, Blume said in the internal memo.
“Since personnel costs account for half of these overheads, a theoretical calculation — assuming no change in labour costs — would imply a reduction of approximately 50,000 positions worldwide,” he said.
VW had already laid out plans to cut 50,000 jobs by 2030 at the Volkswagen brand, Audi and its software unit Cariad.
Blume has indicated that Volkswagen will cut its production capacity in Europe by 500,000 vehicles as it adapts to lower demand and that the group could end production at four factories in Germany.
The chief executive has said he would prefer to avoid costly plant closures and favours the facilities being sold to other manufacturers such as defence contractors.
Investors are already questioning the lack of detail on how Blume will carry out his restructuring plan. Bernstein analyst Stephen Reitman said in a report after the supervisory board meeting that some investors saw the latest discussions as a rerun of the 2024 negotiating round that ended with no large plants being shut down.
Blume has argued Volkswagen’s current business model, which relies heavily on exporting cars from Europe to the rest of the world, is no longer fit for purpose with legacy manufacturers facing growing competition from Chinese carmakers.
However, Blume faces an uphill battle to win over union figures, who hold significant influence at supervisory board level.
Unions have outwardly criticised the plans and said speculation over further massive job cuts had led to an “enormous loss of trust” between workers and management.
