VW Slashes 7,000 Jobs to Refocus on Electric Cars
March 13 2019 - 7:31AM
Dow Jones News
By William Boston and Max Bernhard
BERLIN -- Volkswagen AG's namesake brand said Wednesday it would
cut up to 7,000 administrative jobs over the next five years as the
company focuses its spending on technology.
Volkswagen is spending billions to develop and produce electric
vehicles outfitted with state-of-the-art communications and
infotainment systems. To unlock capital for these investments, it
is also modernizing its processes from the office tower to the
factory floor.
The moves are part of an industrywide shift in which vehicles
and manufacturing processes that have been largely unchanged for a
century are being redesigned as computing power overtakes
horsepower in a new generation of electric and increasingly
self-driving vehicles.
The changes have brought the auto industry in to direct
competition with Silicon Valley tech giants such as Alphabet Inc.'s
Google, electric car pioneer Tesla Inc., and ride-hailing behemoth
Uber Technologies Inc. Investors sizing up the competition have
depressed the share prices of conventional auto makers.
Ralf Brandstätter, the VW brand's chief operating officer, said
on Wednesday the brand would invest EUR4.6 billion ($5.2 billion)
in new information technology equipment and systems, largely to
digitize routine manual tasks in the company's administrative
offices.
The job cuts come on top of a 2016 plan, dubbed the "Pact for
the Future", in which VW is cutting 23,000 jobs, about 19% of the
VW brand's workforce in Germany, through natural fluctuation and
early retirement.
Falling profitability has been putting pressure on VW's core
brand, which generates nearly half of the Volkswagen group's
revenue but less than a third of its profits. The VW marque said
this week that operating return on sales fell last year to 3.8%
from 4.2% in 2017, below its target of at least 4%, partly due to
heavy investment in new technology. The company is now predicting
it will achieve a 6% margin in 2020.
"We must do considerably more in order to deal with the
challenges that are coming after 2020," Mr. Brandstätter said in a
statement. "We will increase the pace of our transformation
considerably in order to make Volkswagen fit for the electric and
digital age."
The new job cuts, about 6% of the VW brand's 119,394 employees
in Germany, or 1% of Volkswagen group's global workforce of 664,500
employees, will be offset by 2,000 new hires of software developers
and engineers specialized in developing electric vehicles. The VW
brand is ramping up its factories to produce 10 million electric
vehicles over the next decade.
The announcement, flagged by the company's labor representatives
over the past few days, comes as VW CEO Herbert Diess is pressing
the company's brands to cut costs to boost profits and increase the
company's market value.
Write to William Boston at william.boston@wsj.com and Max
Bernhard at Max.Bernhard@dowjones.com
(END) Dow Jones Newswires
March 13, 2019 07:16 ET (11:16 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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