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An automobile giant spends a lot of money to hand out the severance reward.

2024-07-18 Update From: AutoBeta NAV: AutoBeta > News >

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AutoBeta(AutoBeta.net)05/02 Report--

In order to streamline staff and boost performance, Volkswagen Group will offer a huge turnover bonus of 900 million euros (about 6.985 billion yuan) to employees who choose to leave in advance, according to media reports.

Of course, it is not surprising that Volkswagen made this decision. In mid-April, officials signaled layoffs, saying they would plan to provide targeted severance pay to select departures in order to cut costs. The severance payment is mainly for those who decide to terminate the agreement before 31 May and will receive an additional 50,000 euros in addition to the normal severance payment. On the issue of severance payment, Gunnar Kilian, director of human resources of Volkswagen Group, said that this was agreed with the labor committee, hoping to work together to make Volkswagen Group strong.

In addition, in November last year, Volkswagen brand CEO Thomas Schaefer also said that 2024 will be a difficult year, many markets are under heavy pressure and electric car orders are not as expected. The Volkswagen brand plans to cut jobs to boost the company's financial outlook. A few days ago, in June last year, Volkswagen CEO Oliver Blume also revealed plans for a massive restructuring of Volkswagen, the first step in which is to cut costs to boost the group's overall profits.

In fact, Volkswagen's downsizing measures have something to do with Volkswagen's weak demand and poor sales in the electric car market. In recent years, with the rapid development of new energy vehicles, Volkswagen, as one of the established car companies in the world, has been a little slow in the electrification wave. Facing the impact from Tesla and many Chinese new energy car companies, Volkswagen Group's sales have also been affected to a certain extent.

According to the data, Volkswagen sold 4.87 million vehicles worldwide in 2023, of which electric vehicle delivery increased by 21.1% to 394000 vehicles compared with the same period last year. For comparison, Tesla sold 1.81 million vehicles worldwide in 2023 and 603700 in China.

At present, Volkswagen Group is not only facing the problem of fierce competition, but also facing the pressure of price war among car companies. Since last year, taking the Chinese market as an example, many car companies have fought a price war one after another, so Volkswagen has to follow the price war, which will undoubtedly reduce profitability.

According to the latest first-quarter financial data released by Volkswagen Group, Volkswagen Group's sales revenue in the first quarter was 75.5 billion euros, down from 76.2 billion euros in the same period last year. Operating profit was 4.6 billion euros, down 20% from the same period last year, and operating profit margin was 6.1%. The after-tax profit was 3.71 billion euros, down 21.6% from the same period last year. As for the decline in profits, officials said it was mainly affected by falling sales, an unfavorable product mix and an increase in fixed costs. For this year's progress, officials expect sales to grow by more than 5% year-on-year in 2024 and operating margins of between 7.0% and 7.5%.

According to the official plan, Volkswagen is still a long way from producing 1 million electric cars a year by 2023. In this context, streamlining personnel can indeed enable Volkswagen Group to improve efficiency in the process of electric vehicle transformation and have sufficient capital to operate to cope with market competition. After all, Volkswagen currently derives most of its sales from traditional cars and still needs the internal combustion engine business to maintain profits. It is worth mentioning that recently, Volkswagen Group is not the only one planning to streamline its staff. Even electric car giant Tesla recently announced plans to cut 10% of its workforce worldwide.

With the new energy track becoming more and more fierce, car companies will also face severe challenges. Nowadays, the competition in the new energy track is particularly fierce, and Volkswagen Group is still in a critical period of electrified transformation, so we must speed up the pace of electrified transformation.

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