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

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

“We are making the company fit for the digital age in a sustainable way,” VW brand Chief Operating Officer Ralf Brandstaetter said in a statement. VW said in March it was looking to trim as many as 7,000 jobs by 2023.

Plans to achieve an annual profit gain of 5.9 billion euros ($6.7 billion) starting in 2023 and deepen cutbacks irked VW’s union leaders as manufacturers wrestle with the transformation of sprawling industrial operations. Software solutions are shaking up the industry’s traditional business model and electric cars require fewer parts and workers for assembly.

The VW 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. VW has been pushing to rein in bloated expenses to lift profitability that’s trailing rivals like PSA Group.

Return on sales for VW’s namesake brand last year fell to 3.8%, from 4.2%, because of higher spending on electric models and production bottlenecks triggered by stricter emission rules.

Labor costs are a “big concern” that risk derailing a much-needed streamlining of operations, VW Chief Executive Officer Herbert Diess told investors in March. Diess, who also heads the VW brand, has been scrapping slow-selling vehicles and car variants to reduce complexity. He targets an operating profit margin of 6% in 2022.

VW signed a broader labor pact in 2016 to cull 30,000 jobs worldwide and generate about 3 billion euros in annual savings.

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 19 billion euros through 2023.

VW will start producing the first model of its all-electric ID. car range toward the end of this year. The brand plans to bring to market more than 20 vehicles based on the ID.’s fully-electric underpinnings and intends to sell at least 1 million purely battery-powered vehicles by 2025. It will start producing the ID. 3 hatchback at its German factory in Zwickau later this year.

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