VW to cut 5.000 jobs ‘to prepare for future challenges’
Volkswagen Group is set to cut jobs despite excellent financial results expected to be announced on Tuesday. According to German newspaper Handelsblatt, the Volkswagen brand workforce will be reduced by 5.000 people. The downsizing is part of a restructuring plan aimed to cut costs by 5,9 billion from 2023.
That won’t come without a struggle, as VW CEO Herbert Diess has to deal with a very powerful employees council and its chairman Bernd Osterloch. Within the company that employs 650.000 people worldwide, nothing moves without the latter’s approval.
Diess has to cope with some resistance within the management too. He wants to screen its 400 managers starting from April. It’s like they’ll have to pass an exam like students again.
Volkswagen says restructuring is necessary to cope with the high investment cost associated to developing electric cars. In 2016, Volkswagen already announced it would save 3,7 billion euro and reduce its worldwide workforce of 650.000 with 30.000 by 2020, but also promised it would create jobs in growth sectors.
The financial results of the Volkswagen Group are excellent, with a substantial profit expected to be announced during tomorrow’s 2018 results press conference. The Volkswagen brand itself is less flourishing. While the group has an operating margin of 7,3 percent, the brand only manages to hit 3,8 percent. Plans to cut costs would push those margins up.
Not only the investments needed to make the transition to electric mobility weigh on the margins, Volkswagen also faces other challenges. Slow sales in China, looming US import taxes, investments in autonomous driving and the aftermath of WLTP might have their effect. Not to mention the bill for the dieselgate scandal, which could amount to 30 billion euro.