Volkswagen to cut 30,000 jobs, will save $3.9 billion in labor pact

Volkswagen AG (Wolfsburg, Germany) announced on Nov. 18 that it reached an agreement with workers to cut as many as 30,000 jobs globally and save €3.7 ($3.9 billion) in expenses, as the company tries to recover from the costs incurred with the emissions-cheating scandal and invest in electric vehicles.

While this number sounds substantial, an article in Bloomberg by Christoph Rauwald notes that it represents about 5% of the company’s global workforce, which numbers 624,000, and will come primarily through attrition. The company agreed to refrain from forced layoffs until 2025. According to Bloomberg News, many of the company’s employees are getting close to retirement age, especially in the manufacturing plants. The layoffs will take place over a period of about five years.

While the emissions-cheating scandal was a “catalyst” for the remaking of VW, there were other issues, as well, writes Chris Reiter in Bloomberg News. These include that the company has become “too big” and “not profitable enough.” Another impetus for the change is that many jobs won’t be needed for the car of the future.

Rauwald writes that the “labor agreement is critical to Volkswagen’s efforts to accelerate restructuring at its biggest unit and emerge from the worst crisis in its history. It also allows the carmaker to create more jobs in newer technologies by retraining workers at traditional factories and hiring software engineers and battery specialists. The moves highlight the changes sweeping the auto industry, as old-school metal stamping and mechanical expertise make way for electronics and digital technology.

Bloomberg noted that VW is “under pressure to reduce annual capital expenditures, which currently stand at €12 billion, making the company one of the biggest corporate spenders in the world. The company said that it plans to reduce capital expenditures to 6% of sales by 2020 from 6.8% last year.