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Volkswagen could cut 30,000 jobs, Manager Magazin reported
- Volkswagen plans to cut 30,000 jobs in the medium term, Manager Magazin reported citing insiders.
- The newspaper also pointed out that Volkswagen wants to reduce investments by up to 20 billion euros to 160 billion euros over the next five years (Volkswagen budgeted 170 billion euros for the 2025-2029 planning period).
- A Volkswagen Spokesperson did not confirm the 30,000 job cuts but said that savings is needed.
- According to the Magazin, research and development department could be hit hard, forecasts indicate around 4,000 to 6,000 out of 13,000 positions in Germany could be lost.
- This comes after the company announced that it will scrap labor protections and consider closing plants in Germany.
Assessment
There have been many speculations over the number of employees that Volkswagen could cut. The number ranges from 15,000 to 30,000. Given CFO’s comments that Volkswagen is losing 500,000 vehicles per year. The speculated range may not be far from the truth. For instance, Emden plant produces 180,000 vehicles annually and has over 8,000 employees. That means, a 500,000 capacity plant will have around 22,000 employees. But that of course depends on the efficiency of the plant. Closing such a plant would lead to around 2.8 billion euros savings in employees salaries and benefits per annum (22,000x70x35x52). However, laying off such these employees will lead to a restructuring cost of around 4 billion euros, according to Jefferies estimate. While this is good considering the circumstances, I don’t like that research and development is expected to be hit hard given that Volkswagen is still behind rivals when it comes to software development. The company is probably betting on partnerships.