Volkswagen to Slash China Jobs as Part of Global Overhaul | Transport Topics

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Volkswagen AG has begun trimming corporate jobs in China as part of its goal to reduce overhead by 20% globally over the next three years.

The cuts amount to several hundred local staff at the group level, according to people familiar with the matter. Volkswagen is grappling with a persistent decline in sales in its largest market. The company’s premium Audi brand is separately reducing headcount, the sources said, requesting anonymity because the information isn’t public.

The moves are part of a worldwide effort to lower costs through 2026 that Volkswagen reiterated in August. In response to questions from Bloomberg News, the company confirmed the cost-cutting initiative but declined to quantify the layoffs.

Volkswagen Group China will “make a significant contribution to this,” the company said in an email. Optimization efforts “may also include direct and indirect personnel costs” such as administration, travel and training. The company added that it’s premature to provide specific numbers because the effort is ongoing.

A consumer slump in China, coupled with the market’s rapid shift toward electric vehicles, has turned the former stronghold for Volkswagen into a weak spot. In August, the company blamed a second-quarter decline in operating margin partly on the slowdown in China. Deliveries on the mainland dropped 7.4% in the first half amid stiff competition from local manufacturers like BYD Co., and were down 24% last year from 2019 levels.

At its German home base, Volkswagen is also considering factory closures for the first time. CEO Oliver Blume said the environment has “become even tougher” with new players pushing into Europe.

The local cutbacks are being led by China head Ralf Brandstaetter and will take place in stages, the sources said. Beijing’s recent move to raise the country’s retirement age spurred Volkswagen to reassess its personnel levels and accelerate its job-cutting plans, they added.

READ MORE: Volkswagen Could Cancel a No-Layoffs Pledge

Some workers were informed of the plan earlier this week. Some expatriate employees are being sent back to Germany and some mid-to-high-level managers are being dismissed, according to the sources.

China Overhaul

The corporate overhaul includes a structural reorganization, digitizing processes, streamlining operations and localizing some tasks, the company said.

“A significant part of the efficiency target has already been identified in recent months,” VW China said. “Further measures are currently under review.”

Volkswagen’s premium Audi brand, which has more than 700 employees, will be hard hit by the efficiency drive, the sources said. Foreign luxury brands have been hit hard by a slump in Chinese auto sales and the simultaneous shift toward EVs. Mercedes-Benz Group AG issued a profit warning on Sept. 20 amid a deepening slowdown in the world’s largest automotive market.

Volkswagen China makes up only a small portion of the company’s 90,000 staff in China, most of whom are employed by its joint venture. Bloomberg News reported this week that VW and its oldest partner, SAIC Motor Corp., are separately preparing to close at least one plant as demand ebbs for combustion-engine vehicles.

The company’s share of operating earnings from its Chinese ventures fell 20% in 2023 to $2.92 billion, and has declined by about half since 2015.

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