Volkswagen to cut 30000 jobs in historic shake-up

Europe’s largest automaker is trying to increase savings at its biggest unit in Germany, where its costs are high, while finding billions of euros to pay for the cleanup related to its diesel emissions cheating scandal.

On Friday, the company announced the turnaround plan that will lead to over €3.7 billion or $3.9 billion in efficiency gains annually and lift the operating margins at VW brand to 4% by the start of 2020 from its expected 2% in 2016.

In the wake of the diesel saga, the carmaker has said it will cut 30,000 jobs, including 23,000 in Germany, by 2020 to save €3.7bn per year. About $15 billion of that figure comes in a settlement with authorities in the United States and about 500,000 USA customers.

Last year Volkswagen lost $6.6 billion over the “Dieselgate” scandal with almost 11 million cars affected worldwide.

Will the job cuts and investments into electric vehicles help secure VW’s future?

In a nod to looming challenges – compensation costs, the e-mobility revolution and low profitability in its core business – brand manager Herbert Diess said the company would completely reorganise to build more cars with fewer people. “Many didn’t think we could do it”, Diess said.

Some experts argued the cost cuts were not deep enough.Spending on R&D and staff across VW’s automotive operations has been growing for years with the need to overhaul the cost base dating back to before the diesel emissions scandal broke 14 months ago. Volkswagen may yet face further fines as customers in other countries demand compensation, though United Kingdom customers are set to receive nothing after the Government ruled the company acted legally.

“The next generation of electric vehicles will be made here in Germany, not overseas”, said Bernd Osterloh, the company’s top staff representative. This software could identify the testing and reduction of harmful toxics to showcase that the cars met the requirements, but in reality, they didn’t.

Jobs will also go in North America, Brazil and Argentina. VW is aiming to sell as many as 3 million electric vehicles worldwide by 2025. But instead of laying off workers, VW will reduce its workforce through early retirement and not hiring replacements after employees leave. The company agreed to produce two electric cars at factories in Wolfsburg and Zwickau.

The works council’s chairman, Bernd Osterloh, said it had “ensured that these future vehicles are built in Germany and not overseas”.