Volkswagen and Labor Unions Agree to Cut 30,000 Jobs at VW by 2020

The agreement was made in exchange for avoiding forced layoffs until 2025

Volkswagen and Labor Unions Agree to Cut 30,000 Jobs at VW by 2020
Image: Volkswagen
November 18, 2016

Beleaguered automaker Volkswagen has made an agreement with its labor union to get rid of 30,000 jobs at the VW brand by 2020.

The agreement, reports Reuters, was made in exchange for no forced redundancies—or layoffs—in Germany until 2025. This compromise still leaves Volkswagen trailing other automakers in terms of profitability.

The turnaround plan will result in annual efficiency increases of $3.9 billion and a lift of VW's operating margin to four percent by 2020. This year's margin is expected to come in at two percent. Even so, four percent still falls below the margins of other European automakers such as Renault and Peugeot Citroen, which hope to reach six percent in 2021.

Volkswagen is the largest automaker in Europe, and it hopes to increase savings at its largest business in home base Germany, where costs are high. It is also facing millions in fines and settlements due to its diesel emissions scandal, as well as attempting to pay for a shift toward electric and autonomous vehicles.

The leaders of the company's labor unions said that the management had agree to avoid forced layoffs within Germany until 2025, which will help enable the elimination of 23,000 jobs through buyouts, early retirements, and the reduction of part-time employees.

VW stated that jobs will also be eliminated in North America, Brazil, and Argentina, though it did not give more details. The BBC reports that 610,000 people across 31 countries work for the company, approximately 114,000 of whom currently work in Germany, says Reuters.

The labor leaders agreed to the job cuts in exchange for the management's promise to create 9,000 new jobs in electric vehicles, which are to be located mainly at German factories. They were happy with the outcome of the negotiations.

"The most important message is the jobs of the core workforce is secure," said Volkswagen's works council chief, Bernd Osterloh. "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."

The company intends to build electric vehicles at factories located in Zwickau and Wolfsburg. It will construct electric motors in Kassel, and VW will begin developing and producing battery cells in Salzgitter. Volkswagen will also build battery packs intended for electric and hybrid vehicles at its Braunschweig plant.