At least 30,000 jobs will be cut at the core Volkswagen-brand business as part of a new deal between Volkswagen and the relevant labor unions, according to reports. The deal is apparently based around a commitment to “avoid forced redundancies in Germany until 2025” — a commitment that may limit Volkswagen’s ability to be competitive with its global rivals, some analysts have commented.
The new deal will reportedly lead to €3.7 billion (~$3.9 billion) in annual savings by the year 2020, which would raise the Volkswagen-brand’s operating margin from 2% (the expectation for 2016) to 4% (in 2020).
The 4% operating margin would still be well below rivals such as Renault (aiming for an operating margin of 6% by 2021).
The news is certainly related to the ongoing problems from Volkswagen’s diesel emissions cheating scandal, which has resulted in a fair number of lawsuits by governments around the world and associated financial problems.
In relation to the deal, company management has apparently pledged to “create 9,000 new jobs in the area of battery production and mobility services at factories in Germany as part of efforts to shift toward electric and self-driving cars.”
“We have to invest billions of euros in new cars and services while new rivals will attack us — the transformation will surely be more radical than everything we have experienced to date,” commented VW brand CEO Herbert Diess.
A University of Michigan business professor, Erik Gordon, commented on the deal as well: “The deal may be the best the company could negotiate with labor but it’s not a victory for either side. The cuts are too small to make VW cost competitive with Toyota and other global rivals.”
Reuters provides more: “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. … With 610,000 workers globally, VW last year built slightly fewer vehicles than Toyota which has 350,000 staff. The German company has also been slow to cease production of unprofitable vehicles in its 340-model range.”
With the company agreeing to avoid forced redundancies in Germany, the approach within the country will seemingly be one of early retirements, buyouts, and the reduction of part-time staff.
Forced redundancies outside of Germany itself are still basically guaranteed, it should be remembered. The company will apparently be cutting jobs in North America, Argentina, and Brazil.
As a reminder, about 120,000 peoples work for the Volkswagen brand in Germany, representing a fairly notable portion of the population, especially when you factor in spouses and family.
With regard to electric vehicles, the company will apparently be shifting production so as to build motors/drivetrains in Kassel, battery cells in Salzgitter, battery packs in Braunschweig, and the plug-in vehicles themselves in Zwickau and Wolfsburg.
As always with Volkswagen, talk is one thing, actions are another — let’s wait and see what the company does.
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