Volkswagen to cut costs to address ‘decades of structural problems’

Volkswagen CEO Oliver Blume said in an interview published Sunday that the company will begin implementing a planned cost-cutting program that was inevitable in order to address “decades of structural problems” at the German automaker.

According to CNBC, Blume told Bild am Sonntag newspaper on Sunday that “weak market demand in Europe and a significant drop in profits from China reveal decades of structural problems at Volkswagen.”

In the same context, the head of Volkswagen’s works council said last Monday that the carmaker plans to close at least three factories in Germany, lay off tens of thousands of employees and reduce its remaining factories in Europe’s largest economy, as it plans a deeper-than-expected overhaul.

The carmaker has not confirmed the plans, but on Wednesday it asked its workers to take a 10% pay cut, arguing that it is the only way Europe’s largest automaker can save jobs and remain competitive.

Blume said operating costs in Germany were a major drag on Volkswagen’s competitiveness, telling Bild am Sonntag that “our costs in Germany must be reduced significantly.” He added that there was no flexibility on cost-cutting targets, only on how to achieve them. The automaker has set aside around 900 million euros ($975.06 million) in its annual report to implement the measures, according to the newspaper.