Some will receive tens of thousands of euros in severance pay
After announcing a sharp decline in first-quarter profits, the Volkswagen Group announced plans to improve its full-year 2024 results by cutting the size of its German administrative staff. The group will allocate a huge sum of 900 million euros as compensation to workers who decide to leave early.
Although Volkswagen Group's total deliveries increased 3% year-on-year in the first quarter, sales of electric vehicles declined. Sales of electric vehicles in the Chinese market grew by 91%, while in the European and American markets they fell by 24% and 16% respectively. Group revenue in the first quarter was €75.5 billion, down from €76.2 billion in the same period last year, operating profit was €4.6 billion, down 20% year on year, and operating profit margin was 6.1%.
In its financial report, the Volkswagen Group attributed the decline in first-quarter results to «lower sales, unfavorable product mix and increased fixed costs». Group CFO Arno Antlitz explained the need to optimize staff and said he would achieve this goal by providing severance pay.
According to Automotive News Europe, the Volkswagen Group plans to provide severance pay to executives who decide to terminate their contracts early. To implement the plan, the group allocated 900 million euros this quarter. In addition to the normal severance pay, qualified senior managers in Germany can also receive an additional €50,000 in severance pay.
Arno Antlitz said the move was intended to «offset the impact on full-year results» and that eligible executives will be given until the end of May to make their choice and leave. Volkswagen Group HR director Gunnar Kilian predicted staff cuts late last year, saying the group needed to cut staff costs by 20% to meet its annual financial targets in 2024.
The layoffs are also part of Volkswagen Group's overall business strategy to improve the competitiveness of its namesake brand and compete with Stellantis and Chinese automakers such as Xpeng, Nio, BYD and Zeekr, which are expanding their presence in the European Union market .