The Volkswagen Group (ETR: VOW3) of Germany has decided to reduce their workforce by up to 30,000 as a part of its sweeping restructuring program. 23,000 of these jobs are located in Germany, while the remaining 7,000 will be at different locations around the world. Labor unions have agreed to these job cuts after tough negotiations. These job cuts are going to happen over the next five years.
The German car maker has been going through a difficult phase ever since the emissions cheating scandal was exposed. The VW brand has been struggling to remain profitable off late. Last year, the business admitted to rigging about 11 million diesel cars so that they pass emissions tests. Volkswagen was forced to compensate customers and pay up settlement costs. This has cost the business more than $19 billion.
New Focus and Cars for Volkswagen
Despite these expenses, Volkswagen says they now want to make additional investments so that they can come out with new self-driving and electric cars under the VW brand. Much of this new investment will be to bring in new technologies. The money saved from lower salaries will also be poured into these ventures. It was further revealed that the job cuts will help the business save $3.92 billion by 2020.
Productivity in their German factories is going to be increased by 25 percent. Car companies of the future are going to require fewer employees, and people with different skills, the company release said. 9,000 new people with these skills are going to be hired over the years to help Volkswagen (ETR: VOW3) re-focus their business.
Many of Volkswagen’s rivals are also getting into the self-driving and electric car space, and they too are investing a lot of money and re-drawing their strategies. With these moves, Volkswagen will in time be able to compete with them.
Volkswagen’s Biggest Modernization Ever
The German business now employs 610,000 workers in 31 countries. The company wants their pretax return on sales to go up to 4 percent. In the last quarter, this was less than 2 percent. Matthias Mueller, the Chief Executive, said, “The VW brand needs a real shake-up”. This is the biggest modernization program ever for the company, he added.
The cuts will be through early retirement and natural attribution, according to the deal with the labor unions. In exchange, Volkswagen had to promise them that electric vehicles and batteries will be built in Germany.