Volkswagen Makes More Cost Cuts as Sales Continue to Drop in Europe image

Volkswagen plans to boost its efforts to cut costs to offset low demand in Europe, where new-vehicle sales are close to a 20-year low.

VW considers that it should reduce costs dramatically in the following months in all departments, all regions, all plants and at all levels. The German automaker managed to go through the European economic crisis better than other car makers, mainly due to the fact that it has a strong presence in China and its upscale brand, Audi and Porsche, bring high profits.

“We need solid earning power and a competitive cost position,” Arno Antlitz, VW brand board member for accounting and controlling, told 18,000 employees at a meeting in Wolfsburg, according to a VW statement on Monday.

Profit at the VW brand passenger car division during the first half of the year fell 34% to 1.49 billion euro. Sales at the VW group dropped 1% in the EFTA and EU regions in a market which fell 8%. VW brand sales dropped 4%.

Earlier this month VW said that even if the rebound in Europe is still uncertain, it still plans to boost profitability for its mass-market brands. Chief Financial Officer Hans Dieter Poetsch said the company expects the VW car brand to see its operating profit margin up to 6% from 3.5% in 2012.