VW's Cariad software unit to cut costs by 20%, avoid forced layoffs

Volkswagen Group's software unit Cariad has agreed to cut 20 percent of its internal development costs annually until 2028 as it attempts to avoid forced layoffs in a major restructuring prescribed by CEO Oliver Blume.

The struggling subsidiary will offer voluntary buyouts if the 20 percent target isn't reached, according to a deal reached Thursday between management and labor representatives. A timeline for offering the buyouts hasn't been made public, a spokesperson said.

Internal discord and project overload led to delays to key Audi and Porsche electric models, hampering Volkswagen's ability to compete with the likes of Tesla and China's BYD. Blume has made fixing Cariad a key part of his efforts to overhaul VW Group.

As part of Cariad's restructuring former Google and Tesla manager Sanjay Lal will take on the role of chief software officer on Cariad's management board from January.

Lal joined VW in November from Rivian Automotive. Previously he had worked as director of engineering at Tesla before joining Google's Android Automotive project.

Cariad owns stakes in some 40 companies and employs roughly 6,500 people, the bulk of them in Europe.

Rumors of job cuts have swirled at Cariad after Blume appointed Bentley's production boss, Peter Bosch, as the unit's CEO in May replacing Dirk Hiligenberg and later flagged "significant changes" to VW's software strategy.

The automaker was planning to cut 2,000 jobs at Cariad as part of a restructuring to start in 2024, Manager Magazin reported last month.

Blume, who helms both VW and Porsche, said in June that Cariad would accelerate the development of its long-delayed premium software. The technology, called 1.2, will underpin Porsche's electric Macan and Audi's Q6 e-tron that are due to hit the market in 2024.

Thursday's deal foresees Cariad taking the lead on software governance and partnerships in addition to its software development portfolio, including the regulation of AI-driven features within the car, a spokesperson said.