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November 19, 2016

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Scandal-hit Volkswagen says to slash 30,000 jobs

Source: AP | November 19, 2016, Saturday | Print Edition

VOLKSWAGEN announced plans yesterday to cut 30,000 jobs in a wide-ranging restructuring of its namesake brand as it tries to recover from a scandal over cars rigged to cheat on diesel emissions tests.

The German company said the job cuts are part of a long-term plan to improve profitability and shift resources and investment to electric-powered vehicles and digital services.

Company officials at a news conference at its headquarters in Wolfsburg said 23,000 of the job cuts will come in Germany and that the measures will save about US$4 billion a year from 2020.

CEO Matthias Mueller said it was “the biggest reform package in the history of our core brand.” In addition to Volkswagen, the company also makes cars under other brands including Porsche, Audi, SEAT, Skoda and Lamborghini.

The announcement caps a difficult year for Volkswagen, which has been embroiled in an emissions-rigging scandal that damaged the company’s reputation and cost it billions.

Volkswagen has agreed to pay US$15 billion to US authorities and owners of about 500,000 vehicles with software that turned off emissions controls. Around 11 million cars worldwide have the deceptive software.

The scandal has been a spur for the company to address long-standing problems such as high fixed costs at its manufacturing locations in Germany and excessively top-down management that many say created an environment that enabled the cheating.

Herbert Diess, head of the core Volkswagen brand, conceded that Volkswagen had let its costs rise and “lost ground in terms of productivity.” The changes, he said, would make the company “leaner and more efficient.”

The cuts are aimed at addressing Volkswagen’s long-standing cost issue.

Volkswagen, with 624,000 employees, sells roughly the same number of cars as Toyota and General Motors, about 10 million a year. But Toyota does it with 349,000 workers and GM with 202,000.

One reason for VW’s higher cost-base and headcount is the role that employee representatives play at the company. As at other large German companies, employees have half the seats on the board. And the state of Lower Saxony, where the headquarters is located, owns a stake in the company and tends to support employee interests.

The cuts will mainly fall on its 120,000-strong German workforce, but are also foreseen in Brazil and Argentina.

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