Oliver Blume, the chief executive officer of Volkswagen and Porsche, has found himself at the center of scrutiny as his annual earnings for 2024 have reached approximately €10.35 million, marking about 6.5% increase from the previous year's income of €9.7 million. The substantial earnings, reflecting both his roles, raise eyebrows amid the company's turbulent financial situation.
Despite the rising salary figures, VW's board members, including Blume, have announced plans to waive 11% of their earnings for 2025 and 2026 as part of a belt-tightening initiative. This decision is part of broader measures intended to alleviate the financial strain on the automaker, which has seen its profitability decline sharply. The salary waivers are set to gradually decrease until 2029, with the full compensation structure restored by 2030.
Volkswagen's profit for the previous financial year plummeted by nearly one-third, exposing the underlying issues the company is facing. The automotive giant reported revenue of €324.7 billion, but its profit fell to €12.4 billion, hit hard by declining margins particularly from its operations in China. The operating profit from joint ventures there has plummeted from €2.6 billion to €1.7 billion, with projections for 2025 estimating only €500 million to €1 billion.
"Die früheren Gewinne kamen aus China. Diese Zeit ist vorbei," commented automotive expert Ferdinand Dudenhöffer to the KURIER, emphasizing how the lucrative Chinese market has become less beneficial for Volkswagen. Dudenhöffer noted VW's overall strategic approach has heavily relied on Germany, particularly Niedersachsen, causing the company to grapple with the high labor costs associated with the region.
Facing such pressures, VW plans to eliminate approximately 35,000 jobs by 2030. This brutal restructuring will see one out of every four jobs cut from its core brand, leading to deep concerns about workforce stability and morale. While the company's 120,000 employees will receive bonuses of €4,800 for the past year, this reflects only short-term relief as future bonuses will be focused on saving costs, seeing sharp cuts going forward.
Blume himself has already trimmed his fixed salary at Volkswagen from €1.3 million to €1.235 million but benefited substantially from his elevated role at Porsche, indicating the complex earnings structure within the automotive group. Overall, he is part of the nine-member board whose collective earnings have reached around €40 million, and their sacrifices are projected to result in savings of over €4 million annually for the company during the retention of this newly adjusted salary structure.
The urgent need for cost reduction stems from more than just stagnant profits; market analysts highlight the European auto market's increasingly competitive nature. Faced with rising geopolitical tensions and trade restrictions, VW’s scenario calls for scrutiny and immediate remedial action. Investment strategies are set to change, with the total capital investment reduced from €180 billion to €165 billion from 2025 to 2029. Focus will shift away from traditional combustion engine technologies toward electric production to adapt to changing market demands.
VW’s executive management made it clear their investment forecasts will also adapt accordingly to the local market environments. Arno Antlitz, Volkswagen's Finance Manager, stated, "Wir werden auch das Hochfahren unserer Batteriesparte weiter an das Marktumfeld anpassen," which translates to plans of aligning their battery manufacturing to market needs. This acknowledgment of changing times is pivotal as competition from Chinese electric car manufacturers rises.
Collaborations with local firms are becoming central to VW’s revised strategy as seen with the partnership with XPeng, one of China's notable electric vehicle manufacturers. Through this alliance, VW aims to leverage lessons from the Chinese market—previously seen as pivotal for company growth—to regain competitive ground against local rivals offering cost-efficient vehicles. Analysts suggest this exchange of knowledge could lead to significantly cheaper Volkswagen electric vehicles produced in China, thereby enhancing competitiveness.
The challenges faced by Volkswagen and its leadership under Oliver Blume are emblematic of larger industry transformations. With the need for agile responses to economic pressures, the manufacturing behemoth is undertaking risky yet necessary reforms as it attempts to redefine itself amid shifting global markets and declining profitability. The urgency of these transitions is clear; Volkswagen must navigate the balance of streamlining operations, reducing costs, and investing wisely to carve its path forward.