Volkswagen Tosses 30,000 Overboard to Right the Ship
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]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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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.
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.