VW to Cut 30000 Jobs (VLKAY)

VOW3) of Germany has chose to reduce their workforce by up to 30,000 as a part of its sweeping restructuring program.

According to the company statement, Volkswagen is planning to slash 23,000 jobs at German factories by 2020 as part of a strategy aimed at boosting efficiency and sustainable development. These job cuts are going to happen over the next five years. During September 2015, it was revealed that the auto maker was cheating with the level of emissions of its vehicles being run on diesel.

Weighed down by unwieldy labor contracts, a bloated lineup of vehicles and a convoluted structure, the VW brand has struggled with weak profitability.

The far-reaching overhaul of the company comes after Volkswagen admitted cheating on emission tests of its diesel-powered products, and agreed to pay $19 billion in fines, settlement costs and compensation. This is in accordance with the fact that the costs in this unit are much higher than various units across the world.

There has been no deal for Canadian Volkswagen owners as of yet.

The cuts should bring annual savings of €3.7bn (£3.2bn; $3.92bn) by 2020.

VW managers have agreed to build an electric sports utility vehicle at the company’s main plant in Wolfsburg and a smaller electric vehicle, known as the I.D., in the eastern German city of Zwickau, the first source said.

The company added that it was creating 9,000 new positions through its focus on new technology, which aimed to deliver 30 electric models by 2025.

The support of labor and the state of Lower Saxony, where Volkswagen is the largest private sector employer, is crucial because together they hold 12 seats on Volkswagen’s 20-member supervisory board.

Volkswagen Group, with its multiple brands, has more than 600,000 employees but the cuts will mainly fall on its 120,000-strong German work force. This would increase the pre-tax return on sales to 4%; the current return is below 2% as per earning release of the most recent quarter. Matthias Müller, the chief executive, said the move was the “biggest reform package in the history of our core brand”.

A VW spokesman said the company was no longer fixated on providing “big numbers” and was instead prioritizing quality over quantity. The agreement to cut jobs follows eight months of grueling negotiations with the works council and IG Metall trade union.

Volkswagen has been battling a crisis caused by its attempts to dodge strict U.S. emissions limits.