By on October 12, 2016

2015 Volkswagen Beetle Classic, Image: Volkswagen Group of America

Volkswagen’s plan to cut costs by cancelling underperforming models isn’t enough to right the scandal-rocked ship.

With an incredibly powerful workers union breathing down its neck, trimming its ranks has proved a tough operation. Meanwhile, there’s only so many models it can drop, and bills are coming due from the many fines, settlements, and lawsuits stemming from the diesel debacle.

How does Volkswagen get rid of 25,000 employees while placating a union boss who sits on the supervisory board?

According to Reuters, the answer comes down to one word: attrition. Specifically, retiring Baby Boomers.

The automaker has reportedly been in talks with its works council since June, hoping to find a solution that positions the company for stability and growth. Now, there seems to be a compromise that suits everyone, all thanks to employee demographics.

“We have the huge benefit of the baby boomer age groups,” Volkswagen labour boss Bernd Osterloh told German publication Handelsblatt earlier today. “That’s why we can also say the jobs of VW workers are safe.”

Volkswagen has a glut of Baby Boomer employees, and most of them are quickly approaching retirement. By closing the position after each employee leaves, the automaker figures it can unload 25,000 workers over the course of a decade. That’s about 20 percent of its German workforce. A drop in purchase spending and R&D costs would accompany the employee reduction.

If management convinces a good number of workers to take early retirement, savings could exceed $2 billion. Despite the agreement, there’s still acrimony in labor land. The union is reportedly angry over proposed cuts to white collar staff and outsourcing of service staff. Labor talks wrap up in November.

It isn’t just the scandal costs that Volkswagen needs to cover. As it moves away from diesel and gas-powered models, the automaker plans to offer a slew of electric vehicles riding atop modular platforms. The price tag attached to this sea-change is steep.

While many might see this as a “greenwashing” operation designed to wash away a sooty stigma, it could be in the company’s best interests. Germany might outlaw all hydrocarbon-based motoring in the foreseeable future, making an electric fleet a survival tactic.

[Image: Volkswagen of America]

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9 Comments on “Volkswagen Finds a Way to Dump Huge Numbers of Employees and Keep the Union Happy...”

  • avatar
    SCE to AUX

    So no labor hiring at Volkswagen until 2026?

  • avatar

    Leaving the work of 25,000 missing employees to divide up among the remaining employees, for which they’ll get paid nothing extra…perhaps even less?

    • 0 avatar

      Losing employees by natural attrition is now practiced by most Companies. Unlike what the main story states, Volkswagen Corporation is ramping up R&D but trimming costs

      • 0 avatar

        Ramping up output with fewer people seems like a poor plan.

        • 0 avatar

          Because VW has had to maintain employment, they have created jobs needlessly.

          Case in point, I recall reading a story from two years ago that they would be able to eliminate something like 300 employees if they switched all production lines to using robots to mount the hoods on their cars (done with some models, not others). While technically feasible, they haven’t implemented this solution due to the labor unions’ demands for employment.

  • avatar

    How much will VW owe these retirees in the way of pensions and other benefits? That’s a significant burden for US automobile manufacturers.

    • 0 avatar

      I don’t have the raw figures, but remember that the social safety net in Germany is far greater than here in the US. As such, the state’s burden may be far greater than that of Volkswagen.

  • avatar

    As long as union leadership will continue to wet their beaks, who cares about the employees

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