The German auto giant agreed last year to reduce its costs by €10 billion as fears mounted over a slowdown in EV uptake and new competition from cheap Chinese rivals. 

Part of this cost-cutting drive includes a 20% reduction in administrative personnel costs, which is likely to involve a significant reduction in Volkswagen’s 684,000-strong workforce at the end of 2023.

The German publication Wolfsburger Allgemeine Zeitung reports that the automaker is offering lucrative packages to employees no longer needed as part of a push to reduce personnel costs.

Between April and June, the group reportedly offered staffers a special bonus of €50,000 if they agreed to take severance. Alongside typical incentives, the publication says this saw some employees receive up to €450,000 if they departed the company. 

“We must abandon the notion that one day a million vehicles a year will roll off the assembly line in Wolfsburg. We need to prepare for significantly fewer cars,” an unnamed manager told the publication.

A spokesperson for Volkswagen declined to comment on the specifics of the Wolfsburger Allgemeine Zeitung report but said it was part of the company’s “ambitious performance program aimed at increasing VW’s operating profit margin.”

Volkswagen’s personnel cost-cutting drive was agreed with the group’s powerful works council last year, emphasizing that headcount reductions should be carried out in a “socially responsible manner.” 

This includes maximizing the use of the so-called “demographic curve,” as Volkswagen attempts to encourage its baby boomer employees to take early retirement so the company can save on a few years of wages in a critical period ahead.

Volkswagen says it has offered partial retirement to employees born in 1967 and to those with disabilities born in 1968.

Wolfsburger Allgemeine Zeitung reports that the company also hopes 1,500 workers born between 1961 and 1964 will accept a special retirement package to exit the group.

In addition to maximizing the use of its “demographic curve” and paying lucrative bonuses to willing departers, Volkswagen has also installed hiring freezes and frozen access to Tarif Plus, Volkswagen’s highest pay scale group. 

These measures are designed to reduce headcount through gradual attrition as employees leave the company and aren’t replaced by new recruits.

Amidst a mammoth cost reduction push, Volkswagen is pressing ahead with plans to expand its car offering. Volkswagen is taking the long view on electric vehicles as investors fret about a slowdown in demand, with low gas prices and inconsistent levels of charging infrastructure across different countries partly to blame.

In March, the group revealed 30 new models set to be released this year, comprising a mix of hybrid, electric, and internal combustion engine vehicles.

“We are very aware that current public debate is somewhat critical in terms of electric mobility,” Volkswagen CFO and COO Arno Antlitz told investors in March. 

“But we are convinced the future will be electric.”