On Monday, UBS reaffirmed its Sell rating on Volkswagen AG (ETR:VOWG) (VOW:GR) (OTC: OTC:VWAGY), with a steady price target of EUR75.00. The investment firm's analysis followed Volkswagen (ETR:VOWG_p)'s announcement of additional cost-saving measures, aimed at improving the company's financial performance. These measures include more than €4 billion in medium-term cost reductions, with €1.5 billion expected to come from lower wage expenses.
Volkswagen's strategy involves a long-term plan to voluntarily reduce its workforce by 35,000 positions by the year 2030, keeping in line with an extended job guarantee to the same year. The specifics of what the company considers 'medium-term' remain unclear. However, the investment firm expressed skepticism about Volkswagen achieving its target core brand margin of 6.5% by 2026, which is less optimistic than the consensus estimates of 4-5%.
The cost-saving plan detailed by Volkswagen includes several significant operational changes. Production will cease at the Osnabrück facility, affecting 2,300 employees, by mid-2027, and at the Dresden plant, impacting 340 employees, by the end of 2025. Additionally, the company will reduce capacity at the Zwickau factory, where Volkswagen battery electric vehicles (BEVs) will be relocated to Wolfsburg, leaving only the Audi Q4 e-tron in production there.
Further changes include the relocation of the Golf model production from Wolfsburg to Mexico, which will result in two out of the four lines at the headquarters plant being decommissioned. The components unit is also targeted to achieve €500 million in cost savings by 2030. Notably absent from the announcement was any mention of the 10% pay cut management had requested. Instead, the deal includes a wage freeze that will last until 2027.
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