VW GROUP

Company cuts 4 thousand jobs due to digital transition of the brand

The Wolfsburg brand has announced that it will lay off 4,000 general and administrative employees, an essential step in making the company digital and sustainable.
This is a bad news, justified by VW in a statement where Ralf Brandstaetter, COO of the German house, says that "we are making the company fit for the digital age in a sustainable way." On the other hand, this value of redundancies is well below the estimate which was to cut 7,000 jobs by 2023.
To point out that VW will invest no less than 4 billion euros in 2023 to digitize administration and production. This investment, the focus on digitization and rationalization of production, will offer the German brand an annual profit of 5.9 billion euros from 2023.
However, these deep cuts of collaborators have angered VW's unions, unable to perceive the change the automotive industry is undergoing. Software solutions and ever-increasing automation are destroying jobs and electrical models require fewer parts, so fewer people are required on assembly lines. That is, electric mobility will be a double-edged sword, as it will wipe out the finances of all builders, cause some to fall, and merge others and bring deep social problems to governments.
The VW brand is responsible for about half of the sales of the VW group and employs 185 thousand of the 633 thousand people that the group has at its service. With very low productivity ratios, VW has clearly pushed its executives to have strong restraint on spending and thus increase the profit margin released.
It should be recalled that VW's operating profit (sales minus expenses, interest and compensation) is only 3.8%, largely due to the electrification and production constraints triggered by the new WLTP and Euro6d Temp standards. So it's no wonder that VW executives look at the costs of work with great concern and fears of a derailment in terms of pay and rights that could make production more expensive.
In that cost-containment effort, Herbert Diess, VW's chief executive officer and CEO of the VW group, reorganized the brand's ranges, discarding vehicles that do not deliver margin or have low sales volume. It signed a contract of employment with the unions to cut 30,000 jobs around the world, which would generate immediate savings of 3 billion euros per year.
With these tough and socially complicated decisions, Herbert Diess expects the VW brand to earn 5% more revenue this year and an operating income of 4% and 5%, which will be needed for the next round of investments, which will not will be less than 19 billion euros by 2023. José Manuel Costa, de Portugal