Volkswagen’s Cost-Cutting Strategy: Hundreds of Jobs to be Outsourced, Report Says

Volkswagen is advancing its cost-cutting program. This year alone, Europe’s largest automaker aims to reduce its expenses by over ten billion euros. The core Volkswagen brand, in particular, is under significant pressure to slash personnel costs by one-fifth in the coming years, primarily in administrative roles.

However, according to a report by “Handelsblatt,” job cuts are looming in other areas as well. In Germany, hundreds of jobs are expected to be outsourced to external companies, with an insider citing a low four-digit number. The specifics of which roles and locations will be affected by the outsourcing have not yet been finalized, the report notes.

In 2023, the Volkswagen Group employed over 296,000 people in Germany, with around 120,000 working for the VW brand. This makes the reported outsourcing figures seem relatively modest; however, the plans indicate a significant shift in mentality. Historically, Volkswagen has kept many tasks in-house that other companies have long outsourced.

“Volkswagen still maintains many operations in-house that other large companies no longer do. This cannot continue indefinitely, and people need to understand that,” a person familiar with the plans told “Handelsblatt.” The report mentions that the focus will be on operational logistics, which could involve several hundred positions.

The decision to outsource jobs comes as Volkswagen faces mounting pressure to remain competitive in a rapidly evolving automotive industry. The company is investing heavily in electric vehicles (EVs) and digital technologies, areas that require significant financial resources. By outsourcing non-core functions, Volkswagen aims to free up capital to invest in these critical growth areas.

Moreover, the cost-cutting measures are seen as a response to the broader economic challenges facing the automotive sector. Rising raw material costs, supply chain disruptions, and increasing regulatory pressures, particularly around emissions, are all contributing to a more challenging business environment. Volkswagen’s strategy reflects a need to adapt to these external pressures while ensuring long-term sustainability.

The move to outsource jobs is also part of a broader trend in the industry. Many automakers are increasingly relying on third-party providers for various services, from logistics to IT support, to streamline operations and reduce costs. This trend is driven by the need to focus on core competencies and leverage the specialized expertise of external partners.

While the outsourcing plans have not yet been finalized, they are expected to be implemented gradually over the coming years. This gradual approach is intended to minimize disruption and provide affected employees with time to adjust. Volkswagen is also likely to offer support to those impacted by the changes, such as retraining programs and assistance in finding new employment opportunities.

The response from employees and labor unions to the outsourcing plans has been mixed. While some acknowledge the necessity of the measures to ensure the company’s future competitiveness, others are concerned about job security and the potential impact on employee morale. Labor unions, in particular, are expected to play a crucial role in negotiations with the company to protect workers’ interests.

In conclusion, Volkswagen’s decision to outsource hundreds of jobs is a significant move aimed at cutting costs and reallocating resources to essential growth areas like electric vehicles and digital technology. While the exact details are still being worked out, the plan underscores the company’s commitment to remaining competitive in a challenging and rapidly changing industry landscape. The success of these measures will depend on careful implementation and effective communication with all stakeholders, including employees and labor unions.