Automaker Volkswagen to cut 30000 jobs

VOLKSWAGEN AND ITS labor unions have agreed to slash 30,000 jobs (VW has 610,000 employees worldwide) by 2020 to help bolster the companies flagging profits and avoid forced redundancies.

VW brand CEO Herbert Diess said on Friday the company’s plan to reduce 5 percent of its near 600,000 workforce is part of a €3.7 billion ($3.9 billion) brand rebuild as it looks to put its recent scandals behind it.

It also said that Volkswagen would cut 10,000 jobs outside Germany (focusing in North and South America). Since admitting past year to rigging almost 11 million diesel cars to cheat on emissions tests, the company has been forced to pay settlement costs and compensation to consumers of more than EUR18 billion ($19 billion).

Labour leaders agreed to the cuts in exchange for a management pledge to create new 9,000 new jobs in the area of electric cars, mainly at factories in Germany. Earlier this year, VW put aside £13.6bn to cover the cost of the emissions scandal.

Volkswagen, with 624,000 employees around the world, sells roughly the same number of cars as Toyota and General Motors — around 10 million a year.

Plants at Wolfsburg and Zwickau will continue to build electric vehicles based on the Modular Electric Drive Kit (MEB), with the Brunswick plant building VW’s battery systems.

The automaker is facing tens of billions in fines and compensation payments after it was found to be cheating on emissions tests.

The cuts are created to help achieve 3.7 billion euros ($3.92 billion) in annual savings by 2020 to fund a shift to electric and self-driving cars. At Wolfsburg, an additional Volkswagen Group vehicle will also be produced.

The cuts will be through early retirement and natural attribution, according to the deal with the labor unions.

Volkswagen shares rose 0.6 per cent to 118.30 euros at 11:17 a.m.in Frankfurt, reducing the drop since the scandal broke in September 2015 to 27 per cent. 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. The unit hopes to boost its profit margin to 4 percent by 2020 under the new arrangement.

“It’s good that they’re doing it”, Ferdinand Dudenhoeffer, a professor at the University of Duisburg-Essen, said of the Volkswagen plan.

The automaker’s plants in Germany will develop and produce electric vehicles and components, while a pilot plant for battery cells and cell modules will also be developed.