Volkswagen shares down amid concerns over cost-cutting agreement

Investing.com — Shares of Volkswagen (ETR:VOWG_p) traded over 2% lower on Monday following the announcement of a labor cost reduction agreement with its German Works Council. 

While the company presented the deal as a step forward in controlling costs, analysts at Bernstein expressed skepticism about its effectiveness in meeting the ambitious cost-saving targets set by management.

The “Zukunft Volkswagen” agreement, finalized after prolonged negotiations and warning strikes, aims to achieve annual savings of over €4 billion through workforce reductions, production adjustments, and structural measures. 

However, the deal avoids plant closures and guarantees job security until 2030, relying instead on voluntary retirements and natural attrition to reduce the workforce by 35,000 over six years. 

Bernstein analysts noted that these measures appear insufficient to meet Volkswagen’s goals of reducing wage levels by 16-19%, as the expected reductions are estimated at just 4-7%.

Investors are particularly concerned about the deal’s immediate financial impact, with Volkswagen unable to quantify the costs of these measures or their effect on 2024 earnings. 

Bernstein flagged this lack of clarity as a key factor undermining confidence in the stock, emphasizing that the market will remain cautious until further details are disclosed.

Adding to the pressure, the German automaker faces broader challenges, including overcapacity at its domestic plants and intensifying competition from Chinese electric vehicle manufacturers in Europe.