The executives of the German carmaker Volkswagen AG (DE:VOW) will reportedly face a pay reduction of over €300 million by 2030 as a response to its union deal, which was finalized in December. According to a German newspaper, Braunschweiger Zeitung, Volkswagen’s board members will face a greater salary reduction than other management levels or the broader workforce.
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Volkswagen (VW) is a luxury car manufacturer, owning brands like Volkswagen, Skoda, Audi, Bentley, Ducati, Lamborghini, and others in its portfolio.
Volkswagen Secures Union Deal to Avert Plant Closures
This news comes after Volkswagen’s historic agreement with the union in December. The deal prevented the immediate closure of its plants in Germany and avoided compulsory layoffs, following several months of negotiations. Meanwhile, the union called on VW’s management to take pay cuts and take responsibility for the company’s struggles.
According to this deal, Volkswagen aims to reduce its workforce in Germany by over 35,000 jobs by 2030 through socially responsible measures. The company will also cut its production capacity by more than 700,000 vehicles while ensuring that 10 German factories remain operational.
Additionally, Volkswagen stated that the agreement would generate annual savings of €15 billion in the medium term and affirmed that it expects no significant impact on its 2024 financial guidance.
Volkswagen Navigates Rough Roads
Volkswagen has been struggling with declining sales and lower profitability within its flagship VW brand in Europe. The company was considering shutting down three German plants to tackle efficiency challenges.
In addition, Volkswagen has seen its market share in China, its most lucrative market, shrink by nearly half over the past five years. To counter this, the company is working on affordable EVs (electric vehicles) as Chinese EV leaders like BYD (HK:1211) gear up to expand into Europe.
Is Volkswagen a Good Stock to Buy Now?
According to TipRanks’ consensus, VOW stock has received a Moderate Buy rating based on recommendations from 13 analysts. It includes six Buy, five Hold, and two Sell ratings. The Volkswagen share price forecast is €113.85, which is 25% above the current price level.
