Volkswagen Will Cut Staffing Costs By A Fifth As Part Of Its $10.8B Savings Plan

Volkswagen’s woes are taking turns for a place under the spotlight. After pausing production at some of its electric vehicle factories in Europe citing weak demand and the brand’s CEO saying that it was “no longer competitive,” the people’s car manufacturer has released more details about its $10.8 billion savings plan that should put it back on track.

According to Automotive News Europe, citing an internal memo, VW plans to cut administrative staff costs by a fifth. Worldwide, the German carmaker had about 600,000 employees in 2016, when it faced severe backlash after the Dieselgate scandal. Back then, it announced that roughly 30,000 people would lose their jobs.

That leaves roughly 560,000 people today. A fifth of that means that probably 112,000 jobs will be affected by the change, but Volkswagen said it will not resort to layoffs. Instead, the staffing cuts will happen by way of partial and early retirement, the internal memo mentioned.

Besides the restructuring, VW will reduce the product cycles from 50 months or a little over four years to just three years. This means that we should see facelifted and new-generation models one year later during their lifetime. Furthermore, a planned $862 million (€800 million) research and development site in Wolfsburg, Germany will no longer be built.

In the previous decade, Volkswagen produced about 780,000 cars on average per year at its plant in Wolfsburg. By comparison, this year the company hopes to achieve 500,000 units, which is far below its previous achievements. “At the end of November, after 11 out of 12 months, we have produced 453,000 vehicles,” works council head Daniela Cavallo said for Automotive News Europe.

“We will need to operate with fewer people in many areas at Volkswagen in the future,” brand boss Thomas Schaefer told employees at a meeting in Wolfsburg on Wednesday. “This doesn’t mean more work for fewer people, but rather shedding old habits and saying no to duplicating efforts and inefficiencies,” he added.