Warnings about another wave of massive job losses at Volkswagen have been circulating for a few weeks, but now a new report says the company will cut one-fifth of its administrative staff. But it is hoping to soften the blow by offering early retirements as opposed to all-out firings, for now at least.
The plan, according to an internal memo sent to staff members, is to cut staff through partial or early retirement as opposed to layoffs, and not hiring new people to fill those jobs, according to Automotive News Europe. Back in June, the VW Group announced a new cost-cutting program designed to save €10 billion ($10.8 billion) by 2026, and this is all part of that. The goal is to meet a return-on-sales target of 6.5%, which is up from 3.6% last year, according to Reuters.
“We will need to operate with fewer people in many areas at Volkswagen in the future,” VW CEO of passenger cars Thomas Schäfer told employees yesterday, according to the report. “This doesn’t mean more work for fewer people, but rather shedding old habits and saying no to duplicating efforts and inefficiencies.”
The job cuts are part of the automaker’s struggle to keep pace as the industry shift to EVs, with VW’s electric car orders falling in Europe. The company has already slashed production at several plants in Germany, and now it’s facing mounting pressures from EV competitors Tesla and BYD, which are taking a hefty market share in VW’s biggest markets. Higher interest rates and inflation and an end to EV subsidies in Germany have also taken their toll on VW, Europe’s biggest automaker.
Other cost-saving measures, reports Reuters, include reducing product cycles from three years to 50 months, slashing overall production times, and offering fewer model options and trims. Plans for a new €800 million R&D site in Wolfsburg, Germany, have also been scrapped. Schäfer just came out and said last week at a staff meeting: “With many of our pre-existing structures, processes, and high costs, we are no longer competitive as the Volkswagen brand.”
Tough days for VW, which has struggled to transition to EV powertrains, which are much more expensive than an equivalent ICE vehicle, and that difference is more noticeable in VW’s market segments. Plus they’ve unrolled some uninspiring products with chaotic, buggy software issues, creating a ton of bad buzz, and that hasn’t helped matters. And let’s not forget that VW is no stranger to axing jobs. They cut 30,000 jobs, with 23,000 of those in Germany, after Dieselgate back in 2016, as part of a “restructuring” designed to help the company recover from the scandal.
Plus VW has been announcing job cuts for months: Volkswagen’s Zwickau site, which employs 10,000 and is the first to exclusively produce electric cars, has already been shaving off jobs due to weakening production demands, starting with 500 temporary jobs being cut next year. At VW software subsidiary Cariad, 2,000 of 6,5000 people employed there will lose their jobs over the next two years.
It’s important to note too that the company’s supervisory board has to sign off on job cuts, and labor representatives and officials “representing the state of Lower Saxony” hold more than half the seats, writes Reuters. While VW originally said that no jobs would be lost before 2029, perhaps this softer touch of “early retirements” – although we still don’t have exact numbers or how early these people will be pushed out – will be enough to get everyone on the same page until then.