Volkswagen to cut 30000 jobs

The company announced a sweeping restructuiring plan Thursday, with a concentration of building electric vehicles in Germany and up to 30,000 job cuts worldwide.

VW has agreed a settlement in the United States to pay up to $15bn (£12bn) to authorities and owners of some of the almost 500,000 affected vehicles. Last year, the business admitted to rigging about 11 million diesel cars so that they pass emissions tests.

In exchange for labor’s concession on jobs, Volkswagen management agreed to replace about 9,000 of the lost manufacturing positions with employment in other areas, such as planned production of electric cars and a new battery factory.

The company said the cuts are part of a plan to boost profitability and fund a shift to electric and self-driving cars, seeking to make €3.7bln in annual savings by 2021.

The German vehicle maker Volkswagen AG (OTCMKTS:VLKAY) held tough talks with the labor union and subsequently announced that it would be cutting up to 30,000 jobs over the next five years. Instead, it will cut the jobs via “natural fluctuation and partial early retirement, taking the demographic curve into account”.

Herbert Dies of Volkswagen AG, speaks at the 2016 International CES trade show in January.

VW has set aside some 18 billion euros to cover the fallout of the scandal, but experts believe the final bill for the buy-backs, fixes and legal costs will be far higher. This allowed the company’s cars to emit 40 times more NOx than American regulatory standards actually permit. Matthias Müller, the chief executive, said the move was the “biggest reform package in the history of our core brand”. VW is aiming to sell as many as 3 million electric vehicles worldwide by 2025. VW engineer James Liang faces up to five years in prison after pleading guilty this month to federal charges for his role in the scandal.

VW confirmed workers at the group’s other brands including Audi, SEAT and Skoda were not affected by Friday’s announcement. The company’s share price closed down 0.8 percent at 128.05 euros, underperforming Germany’s benchmark DAX stock index, which ended 0.2 percent lower. The parts for this electric automobile will be built across the nation in different factories – electric motors in Kassel and lithium-ion batteries in Salzgitter.