AutosVolkswagen's aggressive strategy to save $11.8 billion. Shorter lead times, fewer tests, job cuts

Volkswagen's aggressive strategy to save $11.8 billion. Shorter lead times, fewer tests, job cuts

Volkswagen Passat B9
Volkswagen Passat B9
Images source: © Autokult | Filip Buliński

11:42 AM EST, December 20, 2023

The financial troubles Volkswagen has been dealing with are no secret. Hardly a month passes without the German giant announcing new budget alterations and cost-cutting measures.

The latest changes don't affect the employees or factories but the products themselves. Specifically, the company intends to truncate its implementation time. As part of the "Accelerate Forward/ Road to 6.5" strategy, the company aims to spend not more than 36 months developing new models.

If you believe this time frame seems relatively short, Volkswagen assures that three years is a sufficient period for implementation "without sacrificing quality or safety". Thanks to this decision, the group is predicted to save over a billion euros (approximately $1.18 billion) by 2028.

But that's not all. Test vehicles are also a part of the plan. During the 36-month development cycle, Volkswagen aims to utilize half as many actual test cars and prototypes, substituting them with computer simulations. Once again, they contend that this will not have a negative effect on the product's quality. However, it will cut costs by another 400 million euros (approximately $472 million).

Behind these decisions is a more provocative and sensitive issue, such as "socially acceptable job cuts", which the group mentions. This primarily encourages early retirement and reduces the number of administrative employees. Volkswagen has also placed a freeze on hiring while minimizing special wage programs. The first financial benefits of these decisions are anticipated to emerge as early as next year.

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