For VW, the harshest cuts still coming
It’s getting harder and harder to remember a time when Volkswagen was riding high as the top automaker in the world. Wasn’t that long ago, but it feels like a different world. After a massive international emissions scandal, VW has faced huge costs, lost revenue, and a plummeting brand as customers flock to the competition. The fallout was, likely, inevitable. Now, thanks to executive decisions they had nothing to do with, it looks like upwards of 30,000 VW workers are about to be out of a job.
The report hit various international media outlets recently, saying VW would cut 23,000 in Germany and 7,000 elsewhere. These are round numbers, and they could get worse. But for now, it’s bad enough. VW tried to pull out of the PR nosedive by rededicating itself to the quality and technology that made it a top international contender. But driverless cars and a “commitment” to quality didn’t stop the bleeding.
The cuts are coming for various reasons as the company attempts to reorganize itself in the wake of the staggering and historic losses. Nearly 10,000 jobs will be sacrificed as VW pursues new technology to cut costs in R&D and overall cost-cutting measures that, they hope, will save them up to $4 billion annually as soon as 2020.
Other cuts will come as VW hopes to ramp up productivity at its German auto plants. Updates that could cost up to 20% of the local workers their jobs over the next few years.
While the “we’re building them here” rhetoric will play well in the headlines, the actual result of those headlines are not likely to make rank and file German workers very happy. But at this point, VW says the job losses are inevitable. The company has to become profitable again, and it has to make up for the billions lost thanks to the emissions scandal. One way to do that is to increase its profit margin from 2 percent to 4 percent.
This fundamental goal is what’s driving both VW’s new endeavors and its pursuit of cost saving automation. They need to make more with less, and they need to do it right now. This will allow VW to lay off fewer people than they are now, which may be cold comfort to those this move will impact.
At this point, VW is claiming most of the cuts will be due to “early retirements” rather than firings. But these promises have been made by other companies in the past, and both workers and consumers are getting wise – and very suspicious – of those claims. Beyond profitability, it will be interesting to see whether VW can pull it’s PR out of a nosedive as well.