Thomas Schäfer, CEO of Volkswagen Passenger Cars, complains internally that the returns recently achieved by the main brand cannot be used to make “important investments in the future”.
The top manager, who is also a member of the VW Group Board of Management and leader of the brand group with Škoda, Seat/Cupra and VW Commercial Vehicles, is aiming for more synergies and stronger teamwork. He is even planning a far-reaching performance program.
VW’s head of the works council, Daniela Cavallo, admitted “that we are heading for a very difficult phase, especially in volume business“. And emphasized the inviolability of job security.
It was an extremely explosive message that Thomas Schäfer, head of Wolfsburg’s main label VW passenger cars, sent internally shortly before the workforce left for Father’s Day: “We need a performance program for the brand,” the top manager confidentially let his teams know .
Business Insider was leaked Schäfer’s letter. We document the most important passages in it. In addition, the editorial team shows how VW’s powerful works council boss, Daniala Cavallo, stands on the new plans. Also the Handelsblatt reports of far-reaching changes at VW, with Schäfer as the driving force. In particular, the new course means speed and economy. According to the report, the group wants to increase annual results by at least three billion euros.
According to the confidential information, the central goals behind the extensive performance program for the company are: to secure the success of the brand and thus employment in the long term – in close cooperation with co-determination.
In addition, Schäfer wants to sharpen the brand, improve its products and focus on its customers. “Volkswagen is a super strong global brand – with a great history, millions of loyal fans, legendary products and an incredible amount of technical expertise,” says Schäfer. “Our aim is to make the brand shine again”.
The competition never sleeps
The pace he sets is high. With Nelly Kennedy as Head of Marketing and Andreas Mindt as Head of Design, “real reinforcements” have recently been made in key positions, says Schäfer.
His personal highlight of the past few months is “definitely the world premiere of our ID. 2all show cars!“. Schäfer: “The car shows where we want to go: electric, digital, accessible and with a great design. 100 percent VW, just like the team spirit that I feel everywhere.”
The foundation for the future of the “Love Brand” VW has been laid. Now he is starting phase 2 with his board team. This is about the long-term perspective of the brand and in particular about its economic performance.
Because, according to Schäfer’s reasoning, the environment for the automotive industry is more demanding than ever. Risk of recession, geopolitical conflicts, unstable supply chains, rampant raw material and energy prices, massive competitive pressure – these are just a few of the keywords that are currently shaping the discussions.
The speed of transformation has also increased significantly in recent months. The pressure is increasing. The Volkswagen brand must act.
Securing the future as a goal
Schäfer warns: “We see that our brand – despite all its strengths – is not yet economically solid enough. However, we also have to generate good, competitive returns in times of crisis and in a world that is permanently volatile. That’s the only way we can stay in the driver’s seat.”
It’s all about the long-term perspective. “In the first quarter, we as a brand only generated a return of 3 percent,” admitted Schäfer. “This means that we simply cannot afford important investments in the future. In order to really be crisis-proof, we need a sustainable return on sales of 6.5 percent”.
And that’s exactly why VW is now starting a program for significantly more efficiency and synergies: “This is the only way we can secure our future”. Schäfer sees the digital transformation roadmap as a positive example, with which the company has shown how change can be proactively shaped.
On the way to competitive returns and more resilience, the volume brand group with the VW sister brands Škoda, Seat/Cupra and VW Commercial Vehicles is a significant lever.
Dare to collaborate more
A lot of things have gone well in this group. Schäfer: “The brands are now clearly differentiated and clearly positioned with their portfolios. By jointly developing and producing the Škoda Superb and VW Passat, we save 600 million euros.”
VW is pursuing a similar approach with the small BEVs (pure electric cars; Note d. editor), with Seat and Cupra leading the way. Now something is happening that has only been talked about for a long time: leveraging synergies between the brands. Schäfer: “The regular quarterly results of the volume brand group were a first step. But there has to be more.”
Schäfer used production as an example of the change in approach: “We don’t align our plants to brands, but to platforms. This then determines which models are produced there. Not the other way around”.
These production measures alone are expected to save billions in the coming years. Further cross-brand measures are currently being developed in all areas.
Works council recognizes dark clouds
Schäfer emphasized: “Such a performance program is teamwork. It lives from the know-how, from the ideas and from the courage of our employees – across all areas and levels”.
And: “We intend to work with the works council to inform the workforce transparently about the current state of affairs.”
In a first reaction, the chairwoman of the works council, Daniela Cavallo, spoke on the VW intranet. As a “classification” of Schäfer’s proposal, the top employee representative at Volkswagen said: “The strong business figures of the group are currently making it difficult to see that we are heading for a very difficult phase, especially in volume business. Markets are slowing down, competition is getting tougher. I therefore expect the Management Board to do more of this important work of explaining to the workforce from now on”.
Regarding the latter, Cavallo made it clear: “That is not the task of the works council”.
No more duplication
The Chairwoman of the General Works Council followed up: “And as far as the so-called performance program is concerned: We have taken note of the corresponding goals of the brand board, and talks about them now need to be held. It’s always the same at Volkswagen: Profitability and job security are equal and common goals.”
Cavallo continues: “As employee representatives, we have always supported and promoted issues where our core brand can be further improved. It is also certain that we can continue to rely on our line: collective bargaining cuts or cuts in our job security cannot be made with us. But there are no plans in this direction. Our strongest levers for more efficiency have been the well-known ones for years: leveraging synergies, avoiding duplication of work and trusting in the skills and ideas of our employees”.
Accordingly, the works council will get involved in the upcoming talks and want to report on them on an ongoing basis. Closing words Cavallo: “An important date for this is definitely our works meeting in mid-June at the main plant”.