VW to cut 30k jobs through attrition

VIDEO: REUTERS
The Volkswagen logo is displayed at Serramonte Volkswagen on Nov18, 2016, in Colma, California.
The Volkswagen logo is displayed at Serramonte Volkswagen on Nov18, 2016, in Colma, California. PHOTO: AFP

Carmaker will save $5.6b in expenses globally; it will invest in electric vehicles

WOLFSBURG (Germany) • Volkswagen reached a landmark agreement with workers to cut as many as 30,000 jobs globally and save €3.7 billion (S$5.6 billion) in expenses as the company tries to claw back from the emissions-cheating scandal and invest in electric vehicles.

Reducing headcount by nearly 5 per cent will come through attrition as the automaker agreed to refrain from forced layoffs until 2025, the company said yesterday.

After months of intense talks, labour and management agreed on a package to balance cost-cutting with investment as the auto industry shifts away from traditional combustion engines and adapts to car-sharing services and self-driving technologies.

"This is a big step forward, maybe the biggest in the company's history," VW brand chief Herbert Diess said at a press conference. "All manufacturers must rebuild themselves because of the imminent changes for the industry. We need to brace for the storm."

The VW brand, which accounts for almost half of the group's sales, was struggling even before the emissions crisis erupted last year, tarnishing the carmaker's reputation and burdening the company with at least €18.2 billion in costs for fines and repairs.

In a concession to workers, the manufacturer agreed to build two electric cars at German sites, one in Wolfsburg and one in Zwickau.

The company, which employs 624,000 people globally, will add as many as 9,000 positions for future-oriented projects such as electric vehicles and digital features.

The job cuts will come through early retirement and not replacing workers who leave, and the savings comprise €3 billion at its German factories and another €700 million abroad.

Weighed down by unwieldy labour contracts, a bloated line-up of vehicles and a convoluted structure, the VW brand has struggled with weak profitability. In the first nine months, the unit's operating profit margin narrowed to 1.6 per cent from 2.8 per cent a year earlier. The goal of the labour agreement is to reach a 4 per cent profit margin by 2020.

The deal was a prerequisite for Volkswagen's plans to push ahead with investment in new models and upgrading factories.

The labour talks went down to the wire, with the supervisory board meeting yesterday to approve the company's budget for the coming years as it pushes to sell as many as three million electric vehicles a year by 2025 and expand in services like ride-sharing.

Volkswagen is under pressure to reduce annual capital expenditures, which now stand at €12 billion, making the company one of the biggest corporate spenders in the world.

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A version of this article appeared in the print edition of The Straits Times on November 19, 2016, with the headline 'VW to cut 30k jobs through attrition'. Print Edition | Subscribe