Volkswagen saves on staff
Vehicle production at Volkswagen in Wolfsburg: Jobs are also to be cut in production.
(Photo: dpa)
Düsseldorf Volkswagen produces too expensive; the fixed costs are far too high compared to the competition. The Wolfsburg-based car manufacturer has to regularly listen to this accusation on the stock exchange and by investors. VW CEO Herbert Diess also repeatedly complains that work is not done productively enough, especially in the Wolfsburg parent plant and in the group administration.
In December, the supervisory board reacted to the criticism and prescribed a new savings program for the entire group: by 2023, fixed costs must be reduced by a total of five percent. Savings in personnel are the top priority.
The company and the works council have now agreed on how the fixed cost program is to be implemented in concrete terms. Volkswagen will start a new round of job cuts in Germany. As it is said in corporate circles, up to 5,000 workstations are expected to be available. VW in Germany is starting with saving, the other group brands will follow a little later.
Completion of redundancies for operational reasons is excluded at Volkswagen up to the year 2029. A job creation in the German VW plants can therefore only be done in a socially acceptable manner. Partial retirement offers the greatest leverage for the now additionally planned job cuts. The works council and the company want to open partial retirement offers for those born in 1964 as well.
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VW expects that more employees from administration and less from production will accept the new offer. “The company and the works council have agreed in a key issues paper on further building blocks for the successful continuation of the fixed-cost work in the 2021 financial year,” a spokeswoman confirmed the plans.
Proven instrument: part-time work for older people
As was also reported in Wolfsburg, the car company expects that almost 3,000 VW employees born in 1964 will make use of the new offer this year. Partial retirement is a tried and tested tool for job cuts at Volkswagen. Already since 2017, years close to retirement have been gradually admitted to old age. These employees do not leave the company immediately. Partial retirement is possible for a maximum of six years.
Partial retirement is relatively popular at Volkswagen. Up to 70 percent of a year have made use of this in the past. If almost 3,000 employees born in 1964 actually go into partial retirement, this also entails additional costs for the group. “Volkswagen calculates that more than 300 million euros will be incurred for pension and wage subsidies,” said a group manager.
Those born in 1961 and 1962 have been able to take partial retirement for a long time. Employees who have not yet taken advantage of the offer should be strongly promoted again. Volkswagen’s HR department believes it is possible that another 1,000 employees will be able to voluntarily say goodbye as a result.
The agreement between the works council and the company also provides that older age groups should be offered a new early retirement program. For example, if you are 61 years old, you can take leave immediately and no longer have to work, get a part-time contract for two and a half years with 75 percent of the salary and retire two years earlier. Gaps in pension payments are to be partially compensated by the company.
The expected acceptance of this new early retirement program is not quite as high as that of partial retirement. Volkswagen calculates that around 1,000 employees could make use of early retirement in the near future. The entire, now newly launched program for additional job cuts should cost Volkswagen around half a billion euros, it said in addition in the group.
In the long term, however, Volkswagen expects significant savings as a result. Experience with other automobile manufacturers speaks in favor of this. Ford Europe has cut about 10,000 jobs in the past two years, saving about a billion a year.
The works council wants to keep a close eye on these new job cuts, following what is known internally as the “VW way”. The employee side is looking at whether the downsizing can be managed by a different, intelligent distribution of work among the remaining employees without any additional burden. Where that is not possible, the positions should be filled again.
Investors doubt VW’s willingness to save
There are still doubts among investors as to whether Volkswagen’s will to save is really being adequately pursued. Since 2017, the Wolfsburg-based group has launched two major austerity programs (“Future Pact”, “Roadmap Digital Transformation”). For Germany, this resulted in a total of 27,000 jobs being cut. At the same time, 11,000 new jobs should be created, especially in so-called future areas such as electromobility and digitization.
“But nothing has happened since then,” said Arndt Ellinghorst, automotive analyst at the US investment company Bernstein. The personnel cost ratio in the entire group remains unchanged at 17 percent of sales. The personnel programs of the past only helped to keep costs from rising even further. Other car manufacturers such as Daimler are currently saving significantly more consistently.
Ellinghorst warned that Volkswagen’s spending policy could be a bit more generous again in the future. He sees double structures in the group as the reason for this – with the classic area for combustion engines and the new area of electromobility. “VW is more likely to build up complexity again,” says Ellinghorst.
Volkswagen has not yet commented on the specific sums that the group will save with the new fixed cost program. Ellinghorst calculates total fixed costs of around 80 billion euros, four billion over three years would have to be saved. The VW group has not launched a particularly ambitious austerity program.
Hiring freeze extended
However, Volkswagen does not only want to save with the help of additional job cuts this year. In order to keep costs low, the hiring freeze, which was previously only valid for the first quarter, will be extended to the entire year. Due to the corona pandemic, new hires were only allowed in exceptional cases last year. Volkswagen currently has an active core workforce of around 107,000 in Germany (excluding trainees and students).
The IT and software area, for example, which the group intends to expand massively in the coming years, is excluded from the so-called “level freeze” within the group. In order to be able to hold its own against new competitors such as Tesla and Apple, the proportion of in-house developed vehicle software is to increase from 10 to 60 percent.
If vacancies within the company have to be filled despite the existing hiring freeze, this should be done with your own employees if possible. But there may be a lack of the necessary qualifications. That is why the company and the works council have agreed that the training budget will be increased by 40 million euros this year.
So far, 160 million euros from the “Future Pact” and “Roadmap Digital Transformation” have already been made available for this. The company and the works council agree that further training is an important instrument for transforming the group with the existing workforce.
Within the company, however, the opportunities for further training were not used sufficiently. “Not enough of this is accessed,” complained works council chairman Bernd Osterloh last year. The pressure for further training, for example in the development area for classic engines, is particularly great when electromobility becomes the dominant type of drive.
5000 vacant positions
In addition, Volkswagen wants to try a new instrument for downsizing this year: vacant positions that have not been filled for a long time are to be permanently removed from the staffing plan and thus ensure long-term savings.
There are currently more than 5,000 vacant positions at Volkswagen AG, according to Wolfsburg. “Every supervisor normally guards his or her posts like treasure and doesn’t want to give them up,” says a top manager at Volkswagen. If such positions were permanently deleted, there would simply no longer be an opportunity to fill them again.
The Volkswagen works council has basically agreed that such positions that have been vacant for a long time could be dispensed with. So-called “dimensioning exams”, in which the works councils have an explicit say, are to decide on this in the near future. At the moment, nobody in Wolfsburg dares to make a concrete assessment of how many jobs could be finally deleted as a result.
The works council also has a special right of co-determination when outsourcing contracts. On the employee side, there is a risk that the new downsizing could lead to increased outsourcing. This is why the works councils want to keep a closer eye on things, for example, when development orders are no longer processed in their own technical development department and given to development service providers outside the group.
The most recent negotiations between the company and the works council are said not to have had any major problems. Participants speak of “constructive negotiations”. However, the potential conflict material has not yet been completely resolved.
The current agreements are only valid for the year 2021. For the next two years, both sides will have to sit down again in order to meet the savings targets of the fixed-cost program. In any case, it already seems certain that next year those born in 1965 will be admitted to partial retirement.
More: VW takes Tesla as a benchmark – new strategy with “Trinity”.