This article first appeared on GuruFocus.
Volkswagen AG (VWAGY) is signaling that improving order backlogs won’t slow its overhaul. Chief executive Oliver Blume said the group will continue pushing through restructuring measures, with strict manufacturing cost targets now applied across plants in Germany, Europe and China. The message is consistent: demand may be holding up, but the cost base still needs fixing.
Blume framed the challenge as structural rather than cyclical. Volkswagen continues to grapple with higher labor, energy and regulatory costs in its home market, forcing management to lean on productivity gains to stay competitive. The company also plans to keep reviewing capacity levels, while standing by its target to cut about 50,000 jobs in Germany by 2030, as it looks to avoid overcapacity and rebalance its footprint.
The broader setup could remain a drag on returns. Volkswagen has guided for an operating return that could be as low as 4% this year, reflecting pressure from tariffs, ongoing electric-vehicle spending and intensifying competition from China. At the same time, Blume pointed to China’s structured planning approach and execution discipline as a potential benchmark, while acknowledging that building vehicles in Germany for export is becoming less viable as the global auto market shifts toward regional production.
