Volkswagen, the automotive giant based in Wolfsburg, has initiated a rigorous cost-cutting program, aiming for significant reductions in its workforce as part of a broader strategy to enhance profitability. Under its VW brand performance program, the company targets a financial contribution of up to four billion euros, aspiring to reach a positive contribution of ten billion euros by 2026.

While the exact number of job reductions remains unspecified, Volkswagen has expressed a commitment to focusing on cost efficiency rather than specific headcount targets. The objective is to cut administrative personnel costs by 20 percent by 2026. “We are approaching the restructuring of Volkswagen AG very deliberately and purposefully,” stated Gunnar Kilian, Chief Human Resources Officer, in an internal communication.

Severance Packages to Encourage Voluntary Departures

To avoid forced layoffs, Volkswagen is leveraging severance packages based on mutual agreement between the employee and the company. According to a report from Wirtschaftswoche, the company is offering generous severance packages, with the highest possible payout reaching 404,700 euros for employees who have been with the company for at least 20 years and are in the highest tariff level.

Additionally, a “turbo bonus” of 50,000 euros is available for employees who decide quickly to accept the severance offer. This bonus is applicable to those with at least five years of service who register their decision within two weeks.

The smallest possible severance package is 17,700 euros, intended for employees in the lower tariff brackets with up to five years of service at Volkswagen. Details on severance for managers have not been disclosed but are expected to be higher. Managers might also be eligible for the turbo bonus. Volkswagen has chosen not to publicly comment on the specifics of the severance packages.

Early Retirement as a Sustainable Reduction Strategy

Alongside direct payouts, Volkswagen is significantly utilizing early retirement. This approach is seen as a “sustainably socially compatible” method of reducing positions, particularly aimed at harnessing demographic trends within the company. “The maximum use of the demographic curve is central,” Kilian explained, viewing the substantial potential for early retirement as a crucial lever for sustainable personnel cost reduction at Volkswagen.

This strategic shift in Volkswagen’s employment structure is part of a broader effort to streamline operations and increase efficiency as the automotive industry faces transformative challenges and heightened competition.