Volkswagen has become the latest big car manufacturer to downsize in the face of stagnant global car sales and a push to have its plants be more efficient. In the case of the German car company, which sells more vehicles in Europe than any of its rivals, the chopping came via buyouts that were part of “early retirement” packages.
Dr. Herbert Diess, CEO of the Volkswagen brand, used a press release to explain the company’s decision:
The key to financial recovery is the productivity of our plants. Our target for 2017 is a productivity improvement of 7.5 percent. We have agreed on a total improvement of 25 percent by 2025. Currently, measures for more efficient production are being identified at all the brand’s plants – and implemented step-by-step.
VW has been hit hard by a diesel engine scam that falsely reported emission levels. The action has caused VW to face billions of dollars in fines, particularly in the United States, where its sales are tiny. Investigations about the scandal have reached into the top tiers of VW management, and these investigations are far from over.
Like all big car companies, VW is in a race to launch lines of electric cars, which are forecast to be a large part of sales within several years. It also has to match competition in the autonomous car business, which is also part of major plans at large car companies. Several tech giants, including Google, have entered that market and are close to early release of products.
While VW’s sales are strong in the European Union and China, the world’s largest car market, it has been unable to crack the second largest market by unit sales, which is the United States. Other major German car companies have been successful in America, as have U.S.-based companies and the biggest Japanese manufacturers.
The Diess comments hint that the job cuts are not over.
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