Volkswagen’s passenger car brand will implement savings and cost-cutting measures amounting to 10 billion euros ($10.83 billion) by 2026 to hit a return on sales target of 6.5%, a spokesperson said on Wednesday.
Chief Financial Officer Arno Antlitz posted on LinkedIn earlier on Wednesday that the company would improve production efficiency across the passenger cars brand as well as at CUPRA, Skoda and SEAT, and streamline its product range to achieve the target.
Not all of the 10 billion euros saved will flow directly into higher earnings, the spokesperson said, adding it was not yet decided how the money would be allocated.
“The Volkswagen Group is focusing even more strongly on profitability and cash flow,” Antlitz said in his post.
Antlitz’s statement came after Volkswagen brand chief Thomas Schaefer told workers in an internal memo in mid-May it was planning an overhaul at its core brand to put it on more solid footing.
Returns in the first quarter of 2023 weakened to 3% from 3.6% in 2022, with Schaefer blaming recession risk, geopolitical conflicts, unstable supply chains and rampant raw material and energy prices.
Volkswagen is due to present new financial targets and an updated corporate strategy for the entire group at a capital markets day next Wednesday.
The carmaker’s supervisory board was due to discuss on Tuesday cost-cutting measures across the Volkswagen, Seat, Skoda and Cupra brands to achieve that goal, a source told Reuters.
Optimising production efficiency would be key to achieving the 10 billion euro goal and in particular to producing its planned 25,000-euro entry-level electric vehicle in Spain, Antlitz said in his LinkedIn post.
(Reporting by Victoria Waldersee and Jan SchwartzEditing by Miranda Murray, Kirsten Donovan)