Volkswagen plans core brand revamp to boost returns -internal memo

·1-min read
Technicians work at the production line for electric car models of the Volkswagen Group, in Zwickau

BERLIN (Reuters) -German carmaker Volkswagen plans to overhaul its core brand to increase efficiency and returns, according to an internal memo from VW brand chief Thomas Schaefer seen by Reuters on Wednesday.

"We can see that our brand – despite all its strengths – is not yet on a sufficiently solid economic footing," Schaefer wrote in the memo.

"We need to create good, competitive returns in times of crisis and in a continually volatile world," he wrote. The core brand's target was a return on sales of 6.5%, compared with the 3% achieved in the first quarter of this year, he said.

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Schaefer blamed a challenging environment, including the risk of recession, geopolitical conflicts, unstable supply chains, and rampant raw material and energy prices.

"Pressure is mounting. The Volkswagen brand must act," he wrote.

Handelsblatt business daily first reported the plans, saying they involved cost savings and were designed to increase annual results by at least 3 billion euros. The paper also cited company sources as saying the plans were not about job cuts, although the overall number of employees may decline.

Workers council chief Daniela Cavallo told Handelsblatt she had taken note of the plans.

"Profitability and job security are equally important and common goals," she told Handelsblatt, adding that the workers council would not agree to wage or job cuts. "But there are no plans in this direction," she added.

In the memo seen by Reuters, Schaefer wrote that details of the revamp would be worked out in coming weeks and months.

He also said that he wanted to increase synergies between brands with joint development and production, including using common platforms in some areas.

(Reporting by Madeline ChambersEditing by Chris Reese and Leslie Adler)