Potentially, around 30,000 positions at Volkswagen could be in jeopardy.
Volkswagen, the renowned car producer, is encountering financial struggles and has terminated employment agreements with unions, aiming to replace them with fresh ones. As per a report, Europe's most significant automaker is planning to drastically reduce its workforce, with around 25% of jobs in Germany being at risk.
The struggling Volkswagen group might potentially reduce up to 30,000 jobs in Germany in the long term, as suggested by a report from "Manager-Magazin." Furthermore, the magazine claims that the Chief Financial Officer, Arno Antlitz, intends to decrease investment funds for the next five years to 160 billion euros, a reduction from the previously planned 170 billion euros for the 2025 to 2029 period.
Discussions with the IG Metall union are scheduled for the upcoming week, but the company's spokesperson declined to comment on the information. Volkswagen has ended its long-standing employment security agreement with German unions, and job cuts and plant closures are on the horizon. Brand chief Thomas Schäfer aims to boost the operating margin to the target level of 6.5% in the coming years.
Only 100,000 jobs remaining in Germany?
The pressure is indeed intense, leading to the contemplation of substantial reductions in the workforce. According to "Manager Magazin," hardliners within the company are advocating for the reduction of jobs in Germany from the current 130,000 to 100,000 in the long term. This was also regarded as feasible by CEO Oliver Blume in private circles. His predecessor, Herbert Diess, faced stern opposition with similar plans and was forced to withdraw them.
The situation might be particularly challenging in research and development. Some estimations indicate that up to 6,000 of the approximately 13,000 jobs in Germany could be at risk. Early retirement packages and severance deals might not suffice to cover these cuts.
Volkswagen has already announced that it will need to invest heavily in new technology, powertrains, batteries, and software in the years 2023 to 2024. However, the investment ratio is expected to decrease after this period. In 2021, the company spent 13.5% of its automotive revenue on tangible assets and research and development, totaling around 36.1 billion euros. This year, Antlitz has planned to spend 13.5 to 14.5% of the profit for this purpose, with the ratio scheduled to decrease to under 11% by 2027 and around 9% by 2030, as promised to investors last year. Shareholders have been critical of the high spending levels for several years, as they also reduce the financial scope for dividend payments.
In an effort to reduce costs and invest in new technology, Volkswagen is contemplating significant job cuts in its German manufacturing operations. The 'Manufacture of motor vehicles' sector is expected to be heavily impacted, with some suggesting a reduction of up to 30,000 jobs and hardliners advocating for a more drastic reduction to 100,000 jobs in the long term.
