Volkswagen to slash up to 7,000 jobs in new savings drive

Volkswagen will slash up to 7,000 positions, in order to increase productivity and provide 5.9 billion euros ($6.7 billion) of annual savings at its core VW brand by 2023, in its recent attempt to increase profitability at its top-selling division.

The plan, declared on Wednesday, comes a day after Volkswagen warned it would slash jobs as it accelerates the rollout of electric vehicles, that are less complex to build and require fewer employees.

Volkswagen has struggled to raise profitability at the VW brand for years. Last year, the brand’s operating margin dropped to 3.8 percent, lagging peers such as Peugeot that delivered a margin of 8.4 percent.

The VW brand is aiming a 6 percent margin in 2022.

The automaker has ruled out compulsory layoffs until 2025, but early retirement of staff employed in administrative posts at the company’s headquarters in Wolfsburg, Germany, will help decrease the workforce by 5,000 to 7,000, it said.

The new cost-cutting drive is a continuation of Volkswagen’s 3 billion euros Zukunftspakt savings plan. Until now, VW has realized around 2.4 billion euros of the planned 3 billion yearly cost savings by 2020.

The 5.9 billion euro goal for 2023 comes on top of the 2020 target, the company stated.

At the same time, the automaker will create 2,000 new software jobs, together with electronics positions in technical development, it stated.

The company prepares to become the world’s biggest producer of electric cars by 2025, with the VW brand alone intending to build over 20 models on the group’s electric vehicles platform.

The first electric car on the platform – the “ID” – will show up in the showrooms in 2020 and the automaker expects the launch edition to sell out, VW’s board member for sales Juergen Stackmann stated.

VW refused to tell how many cars would be produced for the launch edition.

VW will start building the ID at a factory in Zwickau, Germany, which has a maximum yearly production capacity of 330,000 models. Zwickau will also construct electric cars for Volkswagen’s Seat and Audi brands.

After Zwickau, Volkswagen will rollout the production of electric vehicles to seven other factories globally including two plants in China and a factory located in Chattanooga, United States, VW stated.