Volkswagen has reached an agreement with its workers to cut 30,000 jobs as it tries to restructure the company for the future. The decision comes as VW faces a watershed moment in the wake of a self-made disaster.
“This is a big step forward, maybe the biggest in the company’s history,” VW brand chief Herbert Diess said at a press conference in Wolfsburg, Germany. “All manufacturers must rebuild themselves because of the imminent changes for the industry. We need to brace for the storm.”
Actually, the storm is already here for Volkswagen and has been for a while. It is no secret that the company needs to find money to invest into promised electric vehicles while also paying billions in fines and settlements resulting from its infamous emissions-cheating scandal.
The job cuts are expected to save $3.92 billion annually, which VW thinks should be enough to bring the company’s operating margin from an expected 2 percent this year to 4 percent by 2020.
Union approval for reducing VW’s workforce by roughly a twentieth came only after management agreed to refrain from forced layoffs until 2025. Volkswagen leadership has also made a pledge to create 9,000 new jobs relating to electric vehicles, mainly in Germany.
“The most important message is the jobs of the core workforce is secure,” VW’s works council chief Bernd Osterloh explained at a news conference. “We have agreed that forced redundancies are ruled out until end 2025. When I see what is going on at other companies, this is a big success in difficult times.”
Of the 30,000 jobs being cut, 23,000 will be in Germany. Volkswagen said that North America, Brazil and Argentina will also see eliminations. Most of the job cuts will come in the form of early retirement, with VW not replacing the outgoing workforce.
[Image: Volkswagen Group] [Source: Reuters]
“Most of the job cuts will come in the form of early retirement, with VW not replacing the outgoing workforce.”
They’re not being ‘tossed overboard’; the company is simply going on an intake diet so it can slim down.
So we’re thorough the search for the guilty phase, and into the punishment of the innocent.
And yes, I realize that attrition isn’t the same as layoff, but there are nonetheless up to thirty thousand workers who won’t get the job they might otherwise have got at VW. I suppose that from a fifty-thousand foot economic viewpoint some worker somewhere will now make and sell the car that VW won’t, but given the high concentration and major economic impact of car manufacturing, this adds up to a heavy social and economic impact in the communities where VW’s factories are located.
Cumulatively, it’s 5% of their workforce over several years.
But to add to your point, it also means a higher workload for the VW workers who remain. I’m starring in that movie now.
SCE….not meaning to question your personal situation as you always comment respectfully so I have no reason to doubt that you are experiencing a higher work load.
However, here is a interesting little piece of information I discovered researching stocks.
“Volkswagen Group, Toyota and General Motors each sell about 10 million vehicles annually around the world, yet VW has more global employees than Toyota and GM combined.”
So, VW employees may eventually see an increase in workload(some may be from an increase in the work week from 33 hours in Germany)they still will be relatively well off.
@dash_riprock:
I was actually thinking of the office staff, specifically engineers. With VW committing to overhaul their product offerings through the next few years, a decreasing engineering pool will make this effort more challenging.
But I’m assuming a lot here without knowing the details of VW’s attrition plans.
There press release stated that they were going to hire 10,000 additional high tech workers. Think it said they were to aid in the switch to electrification.
hreardon’s answer is closer to my understanding. IG Metall(I think) is the union with immense power, along with the gov’t of Wolfsburg, that has acted to keep workers on the shop floor
Not necessarily, SCE. Volkswagen is notorious for being a “make manual labor” employer where many jobs that would normally be automated are instead handled by humans in order to keep the labor unions happy.
Part of the reason why cost savings from MQB were not higher is because Volkswagen’s labor bosses demanded that existing manual jobs be retained. Simple example is how the hood is affixed to the body: most of VWs plants do this manually, yet they have the ability to automate this. Another example is in the paint factories where Volkswagen still performs manual inspections on each car leaving the heat treat, yet again, most automakers use digital imaging to flag imperfections and errors.
Not saying that there won’t be a good chunk of employees left with more work, but I suspect that a very large portion of the workforce not being replaced by humans will have their jobs automated.
@NeilM & APaGttHP a bit further down – Tis good to be the king!
Agree, NeilM, it sucks when you lose your job because your company broke the law.
Happened to me when I worked for WorldCom…unless, of course, all those training systems I developed for them magically caused Bernie Ebbers to defraud investors and bankrupt the company. Pretty sure that wasn’t the cause, but I got ashcanned anyway.
But that’s part of the way it is when you’re an employee.
Are there that many VW employees in North America that are eligible for early retirement? There certainly can’t be in Chattanooga which hasn’t been open for very long. Perhaps this is VW’s way of getting rid of all those malcontents that keep pestering the home office for more SUVs.
“All manufacturers must rebuild themselves because of the imminent changes for the industry.” I guess by imminent changes, he means getting caught cheating.
Was there a bag of horse excrement next to the podium as he gave this speech?
Not replacing workers who retire or leave has been SOP in the US since the mid 90’s.
30,000 plebs shown the door, the leadership that made the bad decisions stay on.
Makes perfect sense.
But all the Von Schmitz and Von Hass are safe, we must not trouble our superiors. This is what we must prioritize in the People’s Car Company.
Does anyone think VW can come back within the next ten years? Nothing interesting in the pipeline and all their bread and butter stuff is old or discredited. Add to that a drastic reduction in revenue…
It’s gonna take a miracle.
I don’t see VW roaring back in the US, but they are unlikely to become insignificant on the world market. Their base, Europe still strongly prefers domestically designed and made vehicles, so they have to get squeezed by someone like Fiat or Pugeot, not very likely given the competitive landscape.
In China they have a very strong brand presence and dealer/logistics network because they started so much earlier than everyone else. Also, competitors that make their cars locally (domestic or foreign brands) are not the same quality as their European/Japanese/US counterparts made in their home countries, and definitely not the homegrown competition.
So in three large markets, they have it made in two for at least another decade. Now if they continue to screw things up and let others pass them in terms of driving, design, and quality, then things will be different. For now, they can make mediocre cars and ride on the driving dynamics and being a German brand for a while.
Unfortunately, when these things go down, it’s the folks at the bottom of the ladder who have to pay the price. But sometimes it’s the guy on the top rung who ends up paying.
About 15 years ago, I worked for WorldCom, and ended up shown the door after our CEO, Bernie Ebbers, defrauded investors out of billions of dollars.
A few weeks later, Ebbers, who touted himself as a devout born again Christian, actually got up in front of his church. From the pulpit, he tearfully begged everyone to not question his “witness for Christ,” presumably because any answer to the question “what would Jesus do” would definitely include “cook the books, bankrupt the company, toss tens of thousands of blameless folks out of a job, and dick stockholders out of billions of dollars.” It’s in the Bible, right?
Ebbers is currently doing a 25 year stretch in Club Fed. With any luck, when he dies in prison, Jesus will just carry ol’ Bernie right home.