Volkswagen to slash 4,000 jobs as part of digital transition

Volkswagen AG’s main car brand stated it will cut as many as 4,000 general and administrative jobs in Germany, fewer than the previously indicated 7,000 job cuts, while adding at least 2,000 IT positions over the next four years and extending a job guarantee until 2029.

In a statement, VW brand Chief Operating Officer Ralf Brandstaetter  said, “We are making the company fit for the digital age in a sustainable way.”

Earlier in March this year, VW had said was looking to trim as many as 7,000 jobs by 2023. The cuts are a part of VW’s plans to achieve an annual profit gain of EUR5.9 Bn ($6.7 Bn) starting in 2023, as automakers the world over struggle with the transformation of industrial operations. Automation and software solutions are altering the industry’s traditional business model and electric cars require fewer parts and workers for assembly.

The Volkswagen car brand, which accounts for about half the group’s global deliveries, employs about 185,000 workers out of a total workforce of 663,000. The cuts come as VW has been focusing to control expenses to boost profitability that’s trailing rivals like PSA Group. 

In March this year, VW Chief Executive Officer Herbert Diess told investors that labor costs are a “big concern" that risk derailing a much-needed streamlining of operations. VW signed a broader labor pact in 2016 to cut 30,000 jobs worldwide and generate about 3 billion euros in annual savings. With higher spending on electric models, the automobile industry will continue to see a shakeup in its traditional structure. Expect more upheavals in the coming years.