Volkswagen Group considers new 20% cost-cutting plan by 2028

The Volkswagen Group remains in an especially difficult position, with demand still weak in China-its single largest market-and trade tensions between Europe and the USA rising again.

A proposed 20% reduction in spending by 2028

Cutting costs has become essential and, despite an efficiency programme already approved at the end of 2024, a fresh initiative may soon be signed off to reduce expenditure by 20% by 2028, according to Manager Magazin. The publication says the aim is to bring the group’s margins back to levels regarded as sustainable.

Manager Magazin reports that the proposal was put to management by chief executive Oliver Blume and chief financial officer Arno Antlitz at an internal meeting held in Berlin in mid-January. The same source notes that no specific areas for the reductions were set out, but it is understood that factory closures were not ruled out during the discussion.

What is driving the cost base

Among the ongoing pressures on the cost structure are heavy investment in software, as well as the parallel development of internal combustion engines and fully electric systems.

A Volkswagen spokesperson stressed that the group has already achieved savings in the tens of billions of euros, helping to cushion adverse geopolitical effects such as the tariffs imposed by the USA. An update on the cost-reduction programme agreed at the end of 2024 is due to be presented at the annual results conference on 10 March.

Additional pressure on German plants

Speculation about further cuts intensified after the German newspaper Handelsblatt reported that the current efficiency programme failed to meet the targets set for 2024. According to the paper, the main German sites-Wolfsburg, Emden and Zwickau-fell short of internal utilisation goals. The Hanover commercial-vehicle plant is also said to be continuing to post high costs.

It should be recalled that, at the end of 2024, management and the workers’ union reached an agreement that envisaged major changes to the group’s operations in Germany, including more than 35,000 job losses and reductions in production capacity.

Even so, the head of the workers’ union, Daniela Cavallo, insisted that the deal reached rules out factory closures and redundancies for operational reasons. “With this agreement, we expressly rule out factory closures and redundancies for operational reasons,” the leader said in a statement.

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