FRANKFURT, Germany – German vehicle manufacturer Volkswagen has said it plans to cut up to 7,000 jobs over the next five years in a bid to encourage profitability and free up cash for investment in new technologies such as electric vehicles, the company said on Wednesday.
The car-maker, which posted an operating profit of €3.2 billion (1.9 percent less, year-on-year) in 2018, said in a statement that it was to implement a plan to strengthen competitiveness on a sustained basis through 2023.
“The company estimates that the automation of routine tasks will result in the loss of between 5,000 and 7,000 jobs by 2023,” the statement said.
Job cutbacks would be possible because the group would halt recruitment of replacements for employees who leave to retire, the statement said.
Volkswagen said it was to begin an “electric offensive” as well as a scheme to achieve efficiency measures in production so as to increase productivity and lift its profit margins on products.
The statement said the final aim was to target earnings improvements of around €5.9 billion per year from 2023 onward.
Among specific measures to be taken up was a program to reduce complexity and optimize material costs, the company said.
Volkswagen said it had to make new investments using the brand’s own resources in order to mitigate the rising costs of more rigorous carbon dioxide and exhaust emission regulations.
“We have already achieved a great deal with the pact for the future: but there is still much more to do if we are to manage the challenges facing us beyond 2020,” said Ralf Brandstätter, Chief Operating Officer of the Volkswagen brand.
“We will significantly step up the pace of our transformation so as to make Volkswagen fit for the electric and digital era,” he added.
Volkswagen said it would consult with its Works Council so as to be able to extend digitalization in administrative areas of the company.
The company’s strategy was scheduled to begin delivering results gradually from 2019 to 2022, the statement said.
“The measures from the earnings improvement program will enable our brand to achieve a competitive return level of six percent in 2022,” said Arno Antlitz, Volkswagen Brand Board Member for Controlling and Accounting. “This improvement is the basis for financing the necessary upfront expenditures for our transformation and live up to our strategic aspirations in the electric age.”