As electric cars bump petrol-guzzlers off the road, VW culls workforce

EDINBURGH —  Scotland spoils its residents with free electricity for electric cars. Like other nations in Europe, it is on an aggressive push to move to be more reliant on more environmentally friendly forms of transport and power generation. It’s just as well, because the electric charge doesn’t go far – as was recently brought home to me after I swapped my much-loved Inferno Orange old racer for a nippy little BMWi3. On paper the battery should take me 120 miles (just under 200km), but like my iPhone, the cold sucks life out of the battery as does the use of all the fun features in the car, like the seat warmers. So, most evenings my car is plugged in for a top up. By the time I’m ready to trade this one in, I’ve no doubt the technology will have moved a long way to meet rising demand for cars that are powered by electrically charged batteries and don’t have an engine. It’s the way of the future, which is why companies like VW are culling their mechanically minded workforce and streamlining operations to make profits in the next era. – Jackie Cameron

By Christoph Rauwald

(Bloomberg) – Volkswagen AG’s main car brand plans to deepen cost cuts and ax more jobs as profits slip in the industry’s shift to electric and self-driving cars.

The German carmaker said Wednesday it will eliminate as many as 7,000 positions – with measures including early retirement and not filling vacant positions – for an annual profit gain of €5.9bn ($6.7bn) starting in 2023.

“We will significantly step up the pace of our transformation so as to make Volkswagen fit for the electric and digital era,” VW brand COO Ralf Brandstaetter said.

The VW car brand, which accounts for about half of the group’s global deliveries, employs about 185,000 workers out of a total workforce of 650,000. VW has been pushing to rein in bloated expenses to lift profitability that’s trailing rivals. Return on sales for VW’s namesake brand last year fell to 3.8% from 4.2%t because of higher spending on future electric models and production bottlenecks triggered by stricter emission rules in Europe.

Labour costs are a “big concern” that risk derailing a much needed streamlining of operations, VW Chief Executive Officer Herbert Diess told investors on Tuesday. Diess, who also heads up the VW brand, has been axing slow-selling models and car variants to reduce complexity. Further measures will include lowering material costs and lifting productivity at its factories by 5 percent to achieve an operating profit margin of 6% in 2022.

Volkswagen rose 0.8%t to €145.1 at 9:42am in Frankfurt trading. The shares have declined 4% in the past 12 months.

VW signed a labour pact in 2016 to cut 30,000 jobs worldwide and generate €3bn in annual savings. The brand has achieved €2.4bn in savings so far and a net reduction of more than 6,300 positions, despite adding 2,700 jobs including in software operations, VW said Wednesday. “We are on track,” Brandstaetter said.

Bernd Osterloh, VW’s powerful labor leader, signaled support for further cutbacks in principal, stressing a job guarantee until at least 2025 remains in place with any job reductions based on voluntary agreements. He also urged a draft labor pact on retraining employees for software and digital operations, Osterloh told Bloomberg in an emailed statement.

For this year, the VW nameplate targets revenue growth of as much as 5% and an operating return on sales between 4% and 5%. It will boost investment in future technology to €19bn through 2023, an increase of€8bn.

VW will start producing the first model of its all-electric ID car range toward the end of this year. Order books for electric ID hatchback open on May 8 and sales chief Juergen Stackmann said feedback from dealers is so strong that the model might be sold out before its official presentation in September.