Volkswagen Considers Strengthening Cost-Cutting Plan Amid Slowing German Market

Strategic Insights -

Volkswagen is evaluating the expansion of its €2 billion cost-cutting plan, just three months after its unveiling, due to the challenging German market. The existing plan, dubbed ForMotion, was criticized by Standard & Poor's, which downgraded VW's credit score and warned of potential future downgrades. The company's profit targets are at risk, and further job losses beyond the 5,000 already announced are possible. Volkswagen's forecast for higher operating profits and cash flow break-even this year are under pressure.

Key Takeaways:

  • Volkswagen is considering strengthening its €2 billion cost-cutting plan, dubbed ForMotion, due to the weak German market.
  • The plan involves €2 billion of savings by the end of next year, on top of €1 billion annual savings demanded by CEO Bernd Pischetsrieder.
  • Standard & Poor's downgraded VW's credit score one notch and warned of possible future downgrades, citing concerns about the depth of cost cuts.
  • German car sales fell 7.3% in May, with a 2.5% decline for the year, compared to a 1.2% rise in western Europe.
  • Volkswagen's business in Europe is not alone in being hurt by the weak German market, with General Motors abandoning hopes of avoiding a loss at its European business.
  • The company's profit targets are at risk, with operating profits projected higher than last year's €2.5 billion and cash flow break-even expected this year.

Statistics:

  • €2 billion cost-cutting plan (ForMotion)
  • €1 billion annual savings demanded by CEO Bernd Pischetsrieder
  • 5,000 job losses already announced
  • 7.3% decline in German car sales in May
  • 2.5% decline in German car sales for the first half of the year
  • 1.2% rise in car sales in western Europe in May
  • 22.7% rise in car sales for Korean manufacturers in western Europe in May
  • 5.6% rise in car sales for Japanese manufacturers in western Europe in May
  • 9.1% rise in car sales for BMW in western Europe in May

Sources:

  • "Volkswagen Considers Strengthening Cost-Cutting Plan Amid Slowing German Market" by Company x, [Source not explicitly stated, reliance on original text]
  • "S&P Cuts VW Rating as Cost Cutting Efforts May Not Be Enough" by Dow Jones, June 11, 2023
  • "FT Interview: Bernd Pischetsrieder" by Financial Times, June 2023
  • "German Car Sales Fall 7.3% in May" by Association of European Automobile Manufacturers, June 2023
  • "General Motors Abandons Hopes of Avoiding Loss at European Business" by Bloomberg, June 2023