Volkswagen to shed 30000 jobs to cut costs after scandal

German automaker Volkswagen and powerful labor unions have agreed to eliminate 30,000 jobs at its core brand VW in exchange for avoiding forced layoffs until 2025 in Germany. The same reports, however, suggest 9,000 new jobs could be created as the company transitions to electric auto production and that there will be no forced layoffs until 2025.

Volkswagen held a news conference at their headquarters in Wolfsburg, where the company officials announced that 23,000 of the cuts will be jobs that are in Germany. Volkswagen has to pay $15 billion to US authorities as well as the owners of almost half a million vehicles. The company admitted that 11m diesel cars had been fitted with software that allowed them to cheat tests.

Volkswagen has said it aims to cut nonessential costs and investments and shift investment toward battery-powered cars and services such as car-sharing and ride-sharing.

“It’s a major step forward, and undoubtedly one of the biggest in the history of the company”, said Diess. 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.

The announcement comes at a time when VW Group is shifting focus to electric, connected and self-driving cars. 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.

It employs 610,000 people in 31 countries.

The turnaround plan announced on Friday will lead to 3.7 billion euros ($3.9 billion) in annual savings by 2020 and lift the Volkswagen (VW) brand’s operating margin to 4 percent that year, from an expected 2 percent in 2016. VW expects that this will save it $3.9 billion in expenses.

In October, the United States federal judge approved Volkswagen’s $14.7 billion settlement.

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

Dragged down by such costs, the group reported a 1.6-billion-euro net loss a year ago, its first in over two decades.

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.

On Thursday, VW revealed a new version of its e-Golf, a battery-electric version of its popular hatchback.