Back in July of 2014, the Volkswagen Auto Group (VAG) announced plans to cut costs at its Volkswagen passenger car brand, setting out to reduce costs by €5 billion ($5.7 billion USD) by 2017. In doing so, the automaker is looking to increase profitability, which will allow it to further close the gap on its direct rival, Toyota. But the automaker’s works council chief recently said that the brand should be able to cut “substantially more” than what it set out to do.
“With a bit more discipline one would easily be able to generate more efficiencies,” Bernd Osterloh, Volkswagen’s top labor representative told reporters at the carmaker’s base in Wolfsburg, Germany.
Osterloh, who also sits on VW’s 20-member supervisory board, said that the potential for savings is even higher across the multi-brand group, but didn’t elaborate further on the statement. He urged fellow Volkswagen executives to tackle the costly proliferation of models and parts at the VW brand in an attempt to raise the division’s profit margin to six percent by 2018. The objective comes despite Volkswagen investing €2 billion to develop a second-generation Phaeton luxury car, a move that contradicts the savings push. The Phaeton has reportedly lost €28,000 on every unit built since its inception. VAG is also funding a Bugatti Veyron successor, which will not be affected by the coming cost cuts.
If Osterloh’s word is anything to go by, look for future Volkswagen models to utilize more streamlined parts.
“I don’t know why we need to have twelve different radiator grills for the Tiguan”, he was quoted as saying.
The Volkswagen brand is also spinning off of its commercial truck division, which includes German MAN SE and Swedish Scania brands, into a separate holding company. VAG acquired the remaining stake in the latter at the end of 2014. Andreas Renschler, the group’s new truck head, previously was gauging a new headquarters in Frankfurt, Germany, but that is now out of the question.
“That’s not where our customers are based,” VW Chairman Ferdinand Piech told reporters in Stuttgart.
Osterloh said that Renschler also had to explore the need for possible acquisitions as he works to integrate MAN and Scania.
“With western Europe and Brazil only, this will be no success story,” he said of the heavy trucks business.
Though where, exactly, VAG will cut costs at Volkswagen passenger cars isn’t as clear as we’d like it to be, we do know that the automaker will not close any production facilities, putting at ease those workers concerned that the €5 billion cost target would end up putting them out of work.