The Wolfsburg-based auto giant says it is making savings to invest in new technologies as EU regulators crack down on emissions. A deal with trade unions prevents any forced layoffs before the end of this decade.
The German automaker Volkswagen announced on Sunday that it will cut thousands of jobs to free up funds for investment in electric vehicles and other new technologies.
The Wolfsburg-based VW plans to focus on e-mobility, hybrid cars, a seamless software-based vehicle operating system and self-driving technologies.
The job cuts are part of VW’s strategy to regain its crown as the world’s largest carmaker as it enters a new green era. VW and its subsidiaries sold 9.3 million cars in 2020.
Toyota pipped to the top spot last year, selling 9.5 million units.
What has been agreed?
An agreement struck with labor unions will see savings through early retirement or semiretirement. A previous deal rules out any forced layoffs until the end of this decade.
The German financial newspaper Handlesblatt reported on Sunday that the plans will cost some €500 million ($597 million) and 5,000 people could leave the company.
Volkswagen declined to give an overall figure, saying only it expected up to 900 workers to opt for early retirement and that thousands could take semiretirement.
The firm also extended a hiring freeze until the end of 2021. It had previously only been in place until the first quarter.
External hires can only be made in areas like electric cars, digitalization and battery cell development, the company said in a statement.
VW says COVID-19 woes ‘successfully contained’
Volkswagen’s personnel chief, Gunnar Kilian, said the firm’s „continued strict cost management“ would allow executives to „finance the necessary investments in the future.“
The firm, which also includes the Porsche, Audi and Seat subsidiaries, has earmarked nearly half of its €150 billion of its research and development budget for the plan.
Executives told investors last month that they believed that the effects of the coronavirus pandemic has been „‘successfully contained.“
They also pointed to the „rapid recovery“ of Volkswagen’s highly-profitable Chinese operations that had helped the corporation weather the recent economic turmoil.
Why are carmakers trying to go green?
A global clampdown on polluting technologies helped to trigger the company’s renewed commitment to going green.
That was brought about, in part, by the diesel pollution scandal in 2015 that revealed the automaker had fitted some vehicles with cheat devices to pass emissions tests.
EU regulators have set stringent emissions targets that will force Volkswagen to boost the proportion of hybrid and electric vehicles of its European car sales to 60% by 2030. That is up from a previous target of 40%.
It means car companies are bringing in low-emission technology, even for smaller mainstream models where profit margins are usually much lower.
Volkswagen said in October it was reviewing its ownership of its Italian sports car brand, Lamborghini, as part of the shake-up.