A new strategy for VW
Volkswagen will cut up to 30,000
jobs globally as it attempts to recover from the biggest scandal in its
history. After months of intense talks, unions and VW’s management
team agreed a package that aims to save €3.7bn (£3.2bn) per year. The job
cuts come after the company accepted a $15bn fine for
cheating emissions tests in June.
Germany will bear the brunt of
the cuts with 23,000 job losses, phased in to avoid redundancies. The company
says it also aims to create 9,000 new jobs as it shifts to electric and
self-drive technology. Volkswagen chief executive, Matthias Müller, said
it will be “the biggest modernisation programme in the history of the group’s
core brand”.
The car giant is one of the
world’s biggest employers, with more than 600,000 workers in 31 countries,
meaning the cuts represent around 5 per cent of its total workforce. VW’s brand
chief, Herbert Diess said: “All manufacturers must rebuild themselves because
of the imminent changes for the industry. We need to brace for the storm.” He
is referring to the potential arrival of self-drive cars.
Volkswagen has been battling a
crisis after it programmed
vehicles to cheat emissions tests. The company fitted its cars with so-called “default devices” – software that detected when cars were being tested in lab conditions and adjusted the car’s settings to make it appear more fuel efficient. The same model then emitted far more greenhouse gases when on the road.
vehicles to cheat emissions tests. The company fitted its cars with so-called “default devices” – software that detected when cars were being tested in lab conditions and adjusted the car’s settings to make it appear more fuel efficient. The same model then emitted far more greenhouse gases when on the road.
The company has agreed to pay a
record $15bn settlement with US authorities and owners of about half a million
vehicles. Volkswagen may yet face further fines as customers in other countries
demand compensation. The VW brand, which accounts for almost half of the
group’s sales, was struggling even before the emissions crisis tarnished its
reputation. It has struggled with weak profitability, weighed down by poor
productivity (see the bar chart below), high wage costs and a complex corporate
structure. From a pre-tax profit of €14.8bn in 2014 the company plunged into a
€1.3bn loss.
The VW group includes a
remarkable number of brands: Volkswagen passenger cars, Audi, Seat, Skoda,
Bentley, Bugatti, Lamborghini, Porsche and Ducati. Despite the emissions
scandal, it is set to take over from Toyota as the world’s biggest carmaker in
2016. Its number 1 market position in China is a huge contributor to that. Adapted from The Independent November 18th 2016
1. Calculate
the labour cost per car for BMW on the assumption that BMW workers earn £40,000
a year. (4)
2. Calculate
the labour cost per car for Jaguar Land Rover, on the assumption that JLR
workers earn £34,000 per year. (4)
3. Assess
the possible value to VW of setting clear environmental objectives for its
operations management team. (12)
