Volkswagen Adjusts Profit Margin Target Amidst Cost-Cutting Efforts
In a recent investor call, Volkswagen revealed a more realistic target for its profit margin, citing a 6% margin on its passenger car brand in the medium term. This adjustment comes after the company previously aimed to achieve a 6.5% margin by 2026.
Cost-Cutting Measures Take Center Stage
The German carmaker’s investor call, held before a closed period on company information ahead of annual results scheduled for March 11, focused on its cost-cutting deal with unions. The agreement, struck last month, includes a promise to reduce the workforce by 35,000 by 2030 without forced redundancies. Executives stated that they aim to achieve 24,000 of these job reductions through natural attrition and early retirement.
A More Optimistic Outlook
Analysts noted that Volkswagen’s call was “slightly more upbeat” compared to Porsche’s call the previous evening, where executives warned of a challenging year ahead in 2025. Volkswagen’s order book in western Europe is reportedly slightly larger than before the pandemic, with around 850,000 units.
EU Emissions Targets and Compliance
The company expects to pay approximately 1.5 billion euros ($1.56 billion) for non-compliance with EU emissions targets. This payment is a significant consideration for Volkswagen as it moves forward with its cost-cutting efforts.
A Shift in Focus
Volkswagen’s adjusted profit margin target and cost-cutting measures signal a shift in focus for the company. As it works to reduce costs and improve efficiency, the company is taking a more realistic approach to its financial goals. With its order book in western Europe showing signs of growth, Volkswagen is poised to make significant strides in the medium term.
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