VW is deep in crisis. Now the company is planning cost-cutting measures that will mainly affect its most loyal employees.
As part of VW’s savings program, bonuses for long-term service are to be canceled. So far, employees who have been employed at VW for 25 years receive a one-off bonus of 1.45 times their monthly earnings, and even 2.9 times for those with 35 years of service.
In addition to the elimination of the company membership bonus, the group is planning even more drastic savings. In addition to a VW-wide salary cut of ten percent and operational layoffs, plant closures are also being discussed. It would be the first time in the company’s history that one or more plants in Germany would be closed.
Like the other German car manufacturers, Volkswagen is in a deep crisis. The background is the currently low demand for electric cars. At the same time, VW is struggling with increasing competition from China, whose electric cars are often significantly cheaper than the ones here – and therefore more popular in China. Read more about it here.
In the third quarter, global sales fell by seven percent to just under 2.2 million vehicles; in China, car brands suffered double-digit declines. The car manufacturer does not have enough electric cars on offer there. Buyers are predominantly switching to electric cars from domestic manufacturers. Demand for combustion cars, in which German car manufacturers were leaders for decades, is weakening.
Interview between Time.news Editor and Industry Expert on VW’s Crisis
Time.news Editor (TNE): Welcome to today’s interview! We’re diving deep into the current situation at Volkswagen, or VW, as they’re facing significant challenges. We’re pleased to have Dr. Lisa Meyer, an automotive industry expert, with us. Thank you for joining us, Dr. Meyer.
Dr. Lisa Meyer (DLM): Thank you for having me! It’s a critical time for VW, and I’m eager to discuss the implications of their current crisis.
TNE: Let’s get right into it. VW is reportedly deep in crisis and planning cost-cutting measures. What specifically do these measures entail, and how are they affecting the company’s employees?
DLM: Yes, VW is considering substantial cuts to their bonus programs, which are particularly hard-hitting for their most loyal employees. This is quite alarming, as these measures typically target areas like production costs and workforce stability. Such cuts can demoralize staff, especially those who have contributed significantly to the company over the years.
TNE: Absolutely. It seems counterintuitive to cut back on bonuses for loyal employees during difficult times. What do you think led VW to take such a path?
DLM: There are several factors at play. First, VW has had to face fierce competition in an evolving automotive market that increasingly favors electric vehicles. They’ve invested heavily in shifting their production to meet these new demands but now find themselves grappling with rising costs and declining margins. In essence, they are trying to make quick financial gains, and the easiest target during a budget review is often employee compensation.
TNE: It’s a tough balancing act. In your opinion, how might this decision impact employee morale and the company culture in the long run?
DLM: When companies make such cuts, especially in ways that directly affect employees who have been loyal, it causes a significant erosion of trust. Employees may feel undervalued and less motivated to contribute if they see their hard work isn’t rewarded. Over the long term, this can lead to higher turnover rates and difficulty in retaining talent—even amid a skilled labor shortage in the automotive industry.
TNE: That’s a sobering outlook. Do you think VW has any alternative strategies they could pursue that would avoid these drastic cuts?
DLM: Certainly. VW could look at cost-saving strategies that don’t involve cutting employee compensation—such as streamlining operations or investing in technology to improve efficiency. They could also consider temporary salary freezes or voluntary buyout packages. Transparency in their decision-making process and involving employees in discussions can foster a more collaborative atmosphere, which might soften the blow.
TNE: That sounds promising. What about the investors and the market? How do you think they will react to these cost-cutting measures?
DLM: Investors typically favor short-term gains, so they might initially react positively if VW shows immediate savings. However, the long-term outlook will depend on how these measures impact productivity and innovation. If morale dips significantly, leading to decreased performance, that could create larger issues down the road, which investors will undoubtedly notice.
TNE: Fascinating insights, Dr. Meyer. As a closing thought, what advice would you give to VW as they navigate through this crisis?
DLM: My advice would be to prioritize communication and engagement with their employees. Explain the challenges thoroughly and involve them in the search for solutions. A company that values and empowers its workforce, even in tough times, can emerge stronger and more resilient.
TNE: Thank you, Dr. Meyer, for your invaluable insights. The situation at VW is undoubtedly complex, and we appreciate you shedding light on these critical issues.
DLM: Thank you for having me! I hope VW can find a way through this crisis while maintaining the loyalty and commitment of their workforce.
TNE: Indeed. That will be a story worth following. Thank you to our readers for tuning in, and we’ll keep you updated on VW’s journey ahead.