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A car with the Volkswagen logo on display at the North American International Auto Show in Detroit, Mich., on Jan. 16, 2018.

Reuters Photographer/Reuters

Volkswagen AG announced another €3-billion (US$3.4-billion) of cost cuts on Thursday in an effort to speed up an improvement in profit margins at its core VW brand.

Still battling to recover from a 2015 scandal over emissions-test cheating, the German automaker has been cutting costs to fund an ambitious shift to electric cars and automated driving.

A key goal is to improve margins at its mass-market VW brand, its largest division by sales, but which has long lagged the profitability of rivals such as Japan’s Toyota, in part because of high labour costs at its German plants.

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“By 2020 we will achieve €3-billion in cost savings, and now aim for a further €3-billion by 2023,” Arno Antlitz, the board member responsible for finance at the VW brand, told a news conference in Wolfsburg, Germany.

That should help the brand reach a profit margin of at least 6 per cent by 2022, three years earlier than previously planned, the company added.

Volkswagen said it is aiming to reduce administrative expenses and take complexity out of the brand’s model lineup, while also striving to raise the productivity of its plants by about 30 per cent by 2025.

The company did not give any details about job cuts, but ruled out forced redundancies. It said VW had started talks with labour leaders about the plan and discussions were constructive.

The VW brand aims to invest more than €11-billion in electric vehicles, digitalization, autonomous driving and mobility services by 2023, with the bulk earmarked for electric cars, the company said.

Volkswagen also said talks over a potential alliance with U.S. rival Ford were going well, and that it would give an update at the beginning of 2019. The firms are exploring areas of potential co-operation including electric and autonomous cars.

Volkswagen also makes Audi, Porsche, Skoda and Seat cars. Volkswagen shares closed down 3.1 per cent on Thursday, while the European autos index was down 4.1 per cent on worries over a fresh buildup in the China-U.S. trade war.

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