Volkswagen to cut 30,000 jobs by 2020 to surge profits

Automotive - Himanshu Gill - Nov 21,2016

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volkswagen to cut 30000 jobs by 2020 to surge profits

Volkswagen group has decided to cut 30000 jobs in the next three years to increase profits in the wake of suffering huge damages in the diesel emission scandal.

Europe’s biggest car maker said that it wants to reduce costs and prioritize investment in electronic vehicles, for which the company will reduce its workforce by 5% until 2020. However, as per an agreement with Volkswagen’s workers’ council, the company will cut jobs by not filling vacancies with external recruits rather than internal redundancies.  The company would also try closing some positions when they become vacant, either by voluntary redundancy or by early retirement.

Majority of the job cuts, around 23000, are said to come in Volkswagen’s home market- Germany. The move is expected to boost profits by $4 billion and productivity in Germany by 25%, as stated by the company. It intends to increase its profit margin to 4% by 2020, compared with 2% last year.

At the moment, Volkswagen employs more than 600,000 workers worldwide, almost twice than its competitor Toyota, which makes nearly the same number of cars every year.

Herbert Diess, head of the VW brand, said that restructuring will prepare the company for upcoming fundamental changes in the car industry. He added that the company intends to invest billions in electric cars and digital services, creating 9000 new positions in Germany.

Volkswagen is battling with a crisis since last year when the company was found to be dodging US emission limits with its diesel engines. The company suffered a loss of $15 billion, which it has agreed to pay in a settlement with US authorities and owners of about 500,000 vehicles. However, even before the emission scandal, it was quite clear that Volkswagen was underperforming as compared to its rivals. Thus, saving up to $4 billion a year seems to be a positive step for the company.