Volkswagen reached a landmark 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.
Reducing headcount by nearly 5% will come through attrition as the automaker agreed to refrain from forced layoffs until 2025, the Wolfsburg, Germany-based company said yesterday. After months of intense talks, labour and management agreed on a package to balance cost-cutting with investment as the auto industry shifts away from traditional combustion engines and adapts to car-sharing services and self-driving technologies.
“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. “All manufacturers must rebuild themselves because of the imminent changes for the industry. We need to brace for the storm.”
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. It also allows the car maker to create more jobs in future-oriented 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.
The VW brand is at the centre of Volkswagen’s changes. The unit accounts for almost half of the group’s sales and was struggling even before the emissions crisis erupted last year, tarnishing the marque’s reputation and burdening the 12-brand group with at least €18.2bn in costs for fines and repairs.
The deal was a prerequisite for Volkswagen’s plans to push ahead with investment in new models and upgrading factories. The labour talks, which started in June, went down to the wire, with the supervisory board meeting yesterday to approve the company’s budget for the coming years as it pushes to sell as many as 3mn electric vehicles a year by 2025 and expand in services like ride-sharing.
Volkswagen is under pressure to reduce annual capital expenditures, which currently stand at €12bn, making the company one of the biggest corporate spenders in the world.
In a concession to workers, the manufacturer agreed to build two electric cars at German sites, one in Wolfsburg and one in Zwickau. The company, which employs 624,000 people globally, will add as many as 9,000 positions for future-oriented projects such as electric vehicles and digital features. The state of Lower Saxony, where Volkswagen is based, will become a technology hub for the manufacturer, and many of the 1,000 jobs to be created there will be for software engineers and cloud-technology experts.
The job cuts will come through early retirement and not replacing workers that leave. The savings comprise €3bn at its German factories and another €700mn abroad. Argentina and Brazil will be hit hardest by the staff reduction outside Germany, with Volkswagen’s personnel chief Karlheinz Blessing describing the Brazil cuts as “brutal.”
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.

From left: Karlheinz Blessing, board member of HR at Volkswagen; Herbert Diess, board member of management of the VW Passenger Cars brand; Matthias Mueller, CEO of VW; chairman of VW Works council Bernd Osterloh; and Lower Saxony State Premier and VW Supervisory board member Stephan Weil attend the company’s press conference in Wolfsburg, northern Germany yesterday. The labour agreement reached yesterday is critical to VW’s efforts to accelerate restructuring at its biggest unit and emerge from the worst crisis in its history.