Volkswagen Group CEO Oliver Blume has acknowledged that the company's cars are not profitable enough, despite being popular among consumers. This issue stems from high production costs, which eat into profit margins, making the vehicles unprofitable. As a result, the company is planning to reduce its product portfolio by up to 50 percent, focusing on high-volume products with the biggest profit margins.
According to Blume, the problem doesn't lie in a lack of demand, but rather in the company's inability to make enough money from its products. To address this issue, Volkswagen plans to streamline its product portfolio, reducing the number of available options for surviving models by up to 75 percent. This move aims to increase sales per model and improve the company's overall profitability.
View Price on AmazonThe VW Group has already announced plans to cut annual production capacity to 9 million vehicles, which is 1 million fewer than today. Although there has been no official confirmation of plant closures, German business publication Manager Magazin alleges that the Zwickau, Emden, Hanover, and Neckarsulm factories are at risk of closure. The company may also reduce its workforce by as many as 120,000 employees, representing roughly a fifth of its global headcount.
Skoda, one of the eight car brands under the VW Group corporate umbrella, has issued a separate statement following the parent company's cost-cutting announcement. A spokesperson for the Czech automaker stated that there is "no immediate impact on our operations" and that the company's factories are running at full capacity.
Motor1's Take: A storm is brewing in Wolfsburg, and it's evident that the old business model just isn't working anymore. High production costs, overwhelming model complexity, and unprecedented competition have all contributed to the automotive giant's struggles. The VW Group has the strength to bounce back, but not before radically shrinking its business.
Tomorrow's Volkswagen Group will look significantly different from today's, and the already dire situation is likely to worsen before it gets better. As the company navigates this challenging period, it's essential to keep a close eye on its progress and see how it adapts to the changing automotive landscape.
Source: motor1.com
