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Frankfurt - Volkswagen AG reached a crucial agreement with workers to cut as many as 30 000 jobs globally and save €3.7bn ($3.9bn) in expenses as the company tries to claw back from the emissions-cheating scandal and invest in electric vehicles, according to people familiar with the matter.
Reducing headcount by nearly 5% will come through attrition, with the German automaker agreeing to no forced layoffs until 2025, said the people, who asked not to be identified before the official announcement on Friday at a press conference starting at 09.30 in Wolfsburg.
Labour and management reached a breakthrough late Wednesday for the VW brand after months of intense talks, with additional details for savings across the group ironed out Thursday, said the people.
The labour agreement is critical to Volkswagen’s efforts to accelerate restructuring at its biggest unit and emerge from the worst crisis in its history.
The VW brand, which accounts for almost half of the group’s sales, was struggling even before the emissions crisis erupted last year, tarnishing the carmaker’s reputation and burdening the company with at least 18.2 billion euros in costs for fines and repairs.
Volkswagen shares rose 1.8% to €119.70 at 09:02 in Frankfurt, reducing the drop since the scandal broke in September 2015 to 26%.
In a concession to VW workers, the manufacturer agreed to rule out forced layoffs until 2025 and to build two fully electric cars at German sites, one in Wolfsburg and one in Zwickau, according to the people. The company, which employs 624 000 people globally, will add as many as 9 000 positions for new projects like electric cars and digital features, they said.
The job cuts, which include as many as 23 000 in Germany, will come through early retirement and not replacing workers that leave. The cost cuts comprise €3bn at its German factories and another 700 million euros abroad, the people said.
Margin Target
Weighed down by unwieldy labour contracts, a bloated lineup of vehicles and a convoluted structure, the VW brand has struggled with weak profitability.
In the first nine months, the unit’s operating profit margin narrowed to 1.6% from 2.8% a year earlier. The goal of the labour agreement is to reach a 4% profit margin by 2020, the people said.
Herbert Diess, the new head of the VW brand, will push forward with a plan to all but eliminate temporary workers at the marque’s factories.
The manufacturer will also limit the number of new employees joining the company to keep a cap on headcount. While VW will offer the 200 best apprentices from a total of 1 000 a qualification to become an engineer, these 200 apprenticeships won’t be filled again.
The VW brand is preparing an overview of its strategic goals for analysts and investors and might provide first details as early as next week, according to the people.
VW late Thursday said in a statement that the results of the negotiations of the so-called future pact with workers will be presented on Friday by top officials including Chief Executive Officer Matthias Mueller, VW brand head Diess, personnel chief Karlheinz Blessing and works council chief Bernd Osterloh.
Electric Expansion
Employee leaders have unusually strong influence at Volkswagen. In addition to occupying half of the 20 seats on the supervisory board, they have special rights including the ability to veto plant closures. The German state of Lower Saxony, Volkswagen’s second-largest shareholder which has two representatives on the board, also tends to side with workers to help protect jobs.
The deal was a prerequisite for Volkswagen’s plans to push ahead with investment in new models. Talks, which started in June, went down to the wire, with the supervisory board meeting on Friday to approve the company’s budget for the coming years as it pushes to sell as many as 3 million electric vehicles a year by 2025 and expand in services like ride-sharing.
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