Last week, Volkswagen announced how it will achieve “greater economic viability.” It can be summed up in three words: massive job cuts. The German auto manufacturing company will cut 30,00 jobs, including 23,000 jobs in Germany, or a fifth of its German workforce. The company projects the job cuts will have a positive impact on VW’s earnings of $3.9 billion from 2020.
VW also plans to improve productivity at its German plants by 25 percent and increase its operating margin to 4 percent by 2020. The embattled auto manufacturer said it will add 9,000 jobs with a “secure future” and promised existing employees wil fill the majority of those positions. Partial early retirement and natural fluctuation will account for some of the 23,000 jobs to be cut in Germany, the company said.
VW’s Board of Management and General Works Council signed a pact for the future. It’s a pact that the company hopes will return it to a “path of profitable growth” with significant improvement of its brand’s competitiveness. The pact is being implemented immediately. And the company said it expects to be “completely repositioned” by 2020.
That’s a tall order given its emissions test cheating scandal and its automotive profit margin compared to competitors, the Wall Street Journal reported last week. VW’s profit margin is 1.7 percent. For comparison, Toyota’s is 7.9; GM’s is 6.4; Peugeot’s is 6; Fiat Chrysler’s is 5.9; Ford’s is 5.3; and Renault’s is 4.7.
The chairman of the Brand Board of Management, Dr. Herbert Diess, characterized the pact in a statement as representing “a fundamental transformation of the value stream, the development of new competences and strategic investment.”
Through the pact, VW will strengthen its “economic viability and competitiveness,” he said, and will safeguard the future of its plants. He described the loss of jobs as being “offset by the creation of jobs in other units.” Through the pact, he asserted, VW is “transforming the entire brand and making it fit for the fundamental transformation of our industry.”
If anything good can come out of VW’s emissions cheating scandal it is that the company, the largest automaker in Europe, plans to invest heavily in new technologies, including electric vehicles. It plans to have its German plants develop and produce EVs and will develop a pilot plant to make battery cells and cell modules. Its German plants in Wolfsburg and Zwickau will also make EVs.
But VW’s new focus on making EVs is not entirely benevolent. The automaker needs to meet strict carbon emissions standards in Europe, and meeting them will only occur with “increased R&D efforts,” the company said in a statement. That statement characterized the automotive industry as undergoing a “fundamental transformation” from conventional combustion engines to electric engines. VW will also toss its proverbial hat in the ring of automated vehicle manufacturing by investing in projects to develop self-driving cars.
“With the pact for the future, we will be entering the field of next-generation e-mobility,” VW General Works Council Chairman Bernd Osterloh said in a statement. “The new cars based on the Modular Electric Drive Kit and electric components from our plants will make our German locations pioneers of electrification within the Volkswagen Group. The Works Council has ensured that these future-oriented vehicles will be made in Germany and not in other countries. ”
Time will tell if VW’s pact will improve both its profit margin and its tarnished image. What we do know is that making more EVs will be good for the planet.
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