Volkswagen will shed 30,000 jobs
Automaker aims to boost profitability at VW unit as shift to electric vehicles looms
Volkswagen has broken a longstanding taboo on job cuts, conceding Friday that it needs to become more profitable to survive what could be a major shift toward electric cars.
But the cuts outlined Friday were probably not deep enough to close a chronic productivity gap with Toyota and other rivals.
As it seeks to recover from an emissions cheating scandal, Volkswagen said it would cut about 30,000 jobs worldwide, including 23,000 in Germany, as part of a deal with its powerful labour representatives to improve low profitability at its largest unit.
Volkswagen is trying to reduce the cost of manufacturing cars that carry the VW badge, many of which are made in Germany by a workforce that effectively controls the company and has resisted job cuts. The plan would lead to savings of $3.9 billion US a year, Volkswagen said Friday.
The company described the plan as the most radical in its history. Herbert Diess, the Volkswagen executive in charge of VW brand cars, said the company needed to brace itself for drastic changes as the automobile industry shifted to electric vehicles.
“Volkswagen has to quickly earn more money and arm itself for the change ahead,” Diess said.
But the job cuts are relatively modest.
The reductions will be phased in through 2020 using early retirement and other voluntary measures. Volkswagen agreed not to make any forced layoffs until at least 2025.
The cuts will be partly offset by 9,000 new jobs related to electric car production and other new technologies. The net reduction in the German workforce would be 14,000 people, or four per cent of the total.
So the overall plan is unlikely to close Volkswagen’s productivity gap with Toyota.
Since last year, the companies have been vying for the title of the world’s largest carmaker, but Toyota has long been more profitable. Toyota has 346,000 employees worldwide compared with 624,000 at Volkswagen.
“It’s good that they’re doing it,” Ferdinand Dudenhoeffer, a professor at the University of Duisburg-Essen, said of the Volkswagen plan. “Whether it’s enough is another question.”
Volkswagen makes most of its money from Audi and Porsche luxury cars. The unit that makes Volkswagen brand cars, and accounts for nearly half the sales volume, had a profit margin of 1.6 per cent during the first nine months of 2016. Volkswagen said Friday that it wanted that brand to achieve a four per cent margin.
The company’s cost problem, which goes back decades, stems in part from the extraordinary power that labour representatives have over company policy.
As at all large German companies, workers hold half the seats on the company’s supervisory board. But at Volkswagen, the workers have de facto control because the state of Lower Saxony owns 20 per cent of the voting shares. The state’s two representatives on the 20-person supervisory board almost always vote with labour. In addition, a special law gives Volkswagen workers veto power over plant closings.
To win worker consent for the plan, the company agreed to invest in production of battery-powered cars in Germany.
Unlike some competitors, Volkswagen plans to build its own electric motors and batteries rather than to buy them from suppliers. The strategy helps to preserve jobs but is regarded by analysts as less efficient.