Volk­swa­gen to shed 30,000 jobs in cost-cut­ting drive

Au­tomaker tries to re­cover from scan­dal

Kuwait Times - - BUSINESS -

FRANK­FURT: Volk­swa­gen an­nounced plans yes­ter­day to cut 30,000 jobs in a wide-rang­ing re­struc­tur­ing of its name­sake brand as it tries to re­cover from a scan­dal over cars rigged to cheat on diesel emis­sions tests.

The Ger­man com­pany said the job cuts are part of a long-term plan to im­prove prof­itabil­ity and shift re­sources and in­vest­ment to elec­tric-pow­ered ve­hi­cles and dig­i­tal ser­vices. Com­pany of­fi­cials at a news con­fer­ence at its head­quar­ters in Wolfs­burg said 23,000 of the job cuts will come in Ger­many and that the mea­sures will save some 3.7 bil­lion euros ($4 bil­lion) a year from 2020. CEO Matthias Mueller said it was “the big­gest re­form pack­age in the his­tory of our core brand.” In ad­di­tion to Volk­swa­gen, the com­pany also makes cars un­der other brands in­clud­ing Porsche, Audi, SEAT, Skoda and Lam­borgh­ini. The lay­offs cap a dif­fi­cult year for Volk­swa­gen, which has been em­broiled in an emis­sions-rig­ging scan­dal that dam­aged the com­pany’s rep­u­ta­tion and cost it bil­lions.

In re­sponse, Volk­swa­gen has agreed to pay $15 bil­lion to US au­thor­i­ties and own­ers of some 500,000 ve­hi­cles with soft­ware that turned off emis­sions con­trols. Around 11 mil­lion cars world­wide have the de­cep­tive soft­ware. The scan­dal has been a spur for the com­pany to ad­dress long­stand­ing prob­lems such as high fixed costs at its man­u­fac­tur­ing lo­ca­tions in Ger­many and ex­ces­sively top-down man­age­ment that many say cre­ated an en­vi­ron­ment that en­abled the cheat­ing.

Her­bert Diess, head of the core Volk­swa­gen brand, con­ceded that Volk­swa­gen had let its costs rise and “lost ground in terms of pro­duc­tiv­ity.” The changes, he said, would make the com­pany “leaner and more ef­fi­cient.”

As well as ad­dress­ing Volk­swa­gen’s long­stand­ing cost is­sue, the cuts un­der­score the com­pany’s sta­tus as key jobs provider in the state of Lower Sax­ony, which owns a stake in the com­pany.

Volk­swa­gen Group, with its mul­ti­ple brands, has more than 600,000 em­ploy­ees world­wide but the cuts will mainly fall on its 120,000-strong Ger­man work­force. Job cuts are also fore­seen in Brazil and Ar­gentina.

Volk­swa­gen sells roughly the same num­ber of cars as Toy­ota and Gen­eral Mo­tors, around 10 mil­lion a year. But Toy­ota does it with 333,500 work­ers and GM with 202,000. The com­pany has said it aims to cut nonessen­tial costs and in­vest­ments and shift re­sources to­ward bat­tery-pow­ered cars and in­ter­net­based ser­vices such as car-shar­ing and ride-shar­ing. The com­pany had been slower than some com­peti­tors to move to­ward elec­tric cars but has shifted its view af­ter the scan­dal un­der­lined diesel’s lim­i­ta­tions. Volk­swa­gen now says it plans to in­tro­duce more than 30 elec­tric-pow­ered ve­hi­cles by 2025, and to sell 2 to 3 mil­lion of them a year. To make the job cuts, the com­pany has cut a deal with its pow­er­ful worker rep­re­sen­ta­tives. Un­der the terms of the deal, Volk­swa­gen has agreed to keep much of the fu­ture in­vest­ment in new tech­nol­ogy in Ger­many and to rely on vol­un­tary de­par­tures such as early re­tire­ment, with no fir­ings.

Top em­ployee rep­re­sen­ta­tive Bernd Oster­loh said “the next gen­er­a­tion of elec­tric ve­hi­cles will be made here in Ger­many, not abroad.” Volk­swa­gen’s pack­age of mea­sures re­ceived a cau­tious wel­come in mar­kets. The com­pany’s share price was up 0.3 per­cent at 129.45 euros.

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