Volkswagen Brand Chief Cites Need for Urgent Improvements

Volkswagen's brand chief has issued a stark warning about the competitiveness of the company's original brand, citing high costs and low productivity as key challenges.

by Faruk Imamovic
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Volkswagen Brand Chief Cites Need for Urgent Improvements
© Getty Images News/Stuart Franklin

Volkswagen's brand chief has issued a stark warning about the competitiveness of the company's original brand, citing high costs and low productivity as key challenges. This announcement comes amid the carmaker's ongoing efforts to navigate the rapidly evolving automotive industry.

Addressing Competitiveness and Financial Performance

During a staff meeting at Volkswagen's headquarters in Wolfsburg, Germany, Thomas Schaefer, the company's brand chief, expressed concerns about the current state of Volkswagen's original brand.

According to a post on the company's intranet site, Schaefer highlighted issues with "pre-existing structures, processes, and high costs" that compromise the brand's competitiveness. This revelation underscores the difficulties Volkswagen faces in maintaining its market position in an increasingly competitive and technologically advanced industry.

Volkswagen, founded in 1937, is part of the larger Volkswagen Group, which also owns prestigious brands like Porsche and Audi. The company has been actively working to improve the financial performance of its globally popular namesake car brand, particularly as the group shifts its focus towards the production of more electric vehicles.

Operational Efficiency and Electric Vehicle Transition

The first three months of the year revealed that among Volkswagen Group's mass-market brands, including Škoda and Seat, the VW brand had the highest sales volumes but the lowest operating profit margins.

The company aims to increase the VW brand’s return on sales from 3.6% in the previous year to 6.5% by 2026, as indicated in an investor presentation. Volkswagen's strategy includes improving the performance of all its mainstream brands through better differentiation and reducing unnecessary expenditures.

"We need to finally be brave and honest enough to throw things overboard that are being duplicated within the company or are simply ballast we don’t need for good results," said Kilian, reflecting the company's determination to streamline operations.

The carmaker is currently negotiating with its works council over a cost-cutting scheme at the VW brand, which is the first step in a group-wide drive to boost efficiency amidst the transition to electric vehicles. The proposed €10 billion ($10.9 billion) savings program is expected to include staff reductions, aligning with the company's previous plans to leverage the "demographic curve" for workforce reduction.

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