Volkswagen to cut 30,000 jobs in historic shake-up

Europe’s largest carmaker faces multibillion-euro bill related to its emissions scandal

Volkswagen: The car giant is looking for big cost savings – €3.7bn worth. Photograph: AP/Erik Schelzig

Volkswagen: The car giant is looking for big cost savings – €3.7bn worth. Photograph: AP/Erik Schelzig

 

Volkswagen has presented a historic shake-up in Germany, cutting 30,000 jobs worldwide to reposition itself as an electric carmaker following last year’s diesel emissions cheating scandal.

Aiming to save €3.7 billion, the company says two-thirds of the job losses will be at VW plants in Germany, with others in North American and Brazil.

VW managers insisted the cuts would come through retirement and reduction of part-time staff and without plant closures or redundancies among its 624,000 employees worldwide.

The massive job cuts in its German home mark a historic break for a company still struggling to cope with the legal and financial consequences of its fraudulent diesel engines.

“It’s clear to all of us: the real work begins, now,” said Matthias Müller, VW chief executive, at a press conference to present the plan.

Core brands

Of particular concern is the profitability the VW’s core brands, Golf and Passat where, for every €100 in turnover, the company earns just €1.60 before interest and taxes.

In a nod to looming challenges – compensation costs, the e-mobility revolution and low profitability in its core business – VW will completely reorganise to build more cars with fewer people, said brand manager Herbert Diess.

“Volkswagen needs to earn money, quickly, and to prepare itself for the future storm,” said Mr Diess, who was recently dragged into a German prosecutor probe into claims that VW executives defrauded investors.

VW’s powerful unions said on Friday they agreed to the cuts on a company promise to create 9,000 new jobs and boost investment in its growing electric car division.

Works council head Bernd Osterloh said the “future pact” had identified Germany, and not VW plants elsewhere, as the focus of the company’s electric car production.

“For Volkswagen, this pact is a huge step forward, certainly one of the biggest in the history of the company,” he said.

Existential crisis

VW faced an existential crisis last year after US investigators found that 11 million diesel engines had been programmed to detect when they were on the road and in a test, switching to a low-emissions mode to appear less polluting than in regular traffic.

VW shares rose 2.1 per cent on the news of the job cuts, as analysts and investors reacted with cautious optimism to the plan. Some in Germany praised the company for taking a leap forward; others were concerned that the pact was not ambitious enough.

Volkswagen has already set aside €18 billion to cover its legal bills and buy-backs, but pessimistic analysts expect the final cost of the diesel deception will be much higher.