VW To Invest $3.7 Billion Into Electric Future, Cuts 23,000 Jobs At Same Time Due To EV Efficiency

Volkswagen

NOV 21 2016 BY MARK KANE 38

Volkswagen I.D. - Coming in 2020, apparently with 600km (373 miles) of range*

Volkswagen I.D. – Coming in 2020, apparently with 600km (373 miles) of range*

Volkswagen announced investments of €3.5 billion ($3.7 billion) in future-oriented areas, which mostly concern electrification of new models.

As a whole, the company is transforming from a pure automaker into a mobility service provider.

Interestingly, efficiency improvements in the labor pool due to making more straight forward electric vehicles will result in up to 23,000 jobs reductions in Germany (out of 120,000), but 9,000 more will ultimately be added in future-oriented areas.

Volkswagen I.D.

Volkswagen I.D.

“The Board of Management and General Works Council of Volkswagen have signed a pact for the future in Wolfsburg following constructive negotiations.

This pact will initiate the return of the Volkswagen brand to a path of profitable growth. The program for the German plants with about 120,000 employees is to significantly improve the competitiveness of the Volkswagen brand and to make the company fit for the future. It will lay the foundation for the transformation of Volkswagen from a pure automaker into a successful mobility service provider in the age of digitalization and increasing e-mobility. The main focus is on reorientation across the entire value stream.

By 2020, the Volkswagen brand intends to be completely re-positioned. Compulsory redundancies are to be excluded and the workforce is to be reduced in a socially compatible way. At the same time, new jobs are to be created in future-oriented areas. Specifically, the pact for the future is to have a positive impact on earnings of €3.7 billion per year by 2020.

Of this figure, the German facilities will account for €3.0 billion. Over the next few years, investments of about €3.5 billion in future-oriented areas of these facilities are planned. This will result in the creation of 9,000 jobs. On the other hand, there is to be a loss of up to 23,000 jobs in conventional areas in Germany, which will be accomplished in a socially compatible way.

New MEB Architecture To Underpin 300+ Mile Mid-Size EV From VW For 2019

New MEB Architecture To Underpin 300+ Mile Mid-Size EV From VW For 2019

Checking details of the investments, we see a lot of new projects in VW’s plants in Germany. Some of which are fairly surprising.

For example there is a plan for a pilot plant for battery cells and cell modules in Salzgitter. Battery cells (not battery packs) is something that Volkswagen’s CEO recently considered as a bad idea after early rumors pushed the company into battery cell manufacturing.

High spending is planned for VW’s Modular Electric Drive Kit (MEB) for new generation electric cars with longer ranges (the first will be production version of the Volkswagen I.D.).

In further detail, Volkswagen’s “pact for the future” includes the following items:

Volkswagen I.D.

Volkswagen I.D. Cutaway

  • Thanks to savings and efficiency improvements in all areas and at all locations in Germany, the company expects a positive annual impact on earnings of about €3 billion from 2020 onwards. The regions outside Germany will also achieve sustainable improvements in earnings. Through their own plans of action, they will contribute about €700 million per year to the pact for the future. As a result, the total improvement in earnings will be about €3.7 billion.
  • The pact for the future is to improve the productivity of the German plants by about 25% and to increase the operating margin to four percent by 2020.
  • To bring Volkswagen to the forefront of the industry in the future-oriented areas of e-mobility and digitalization, the company will be making a massive investment in new technologies. The German plants are to enter the field of developing and producing electric vehicles and components. A pilot plant for battery cells and cell modules is to be developed. At the same time, the future of the conventional units is to be safeguarded. All in all, Volkswagen will be investing €3.5 billion in the transformation of the company.
  • New competences in future-oriented areas are to be developed at the various locations. About 9,000 additional jobs with a secure future are to be created. Volkswagen will mainly be filling these vacancies with existing employees and will also be recruiting specialists from outside the Group. Over the next few years, Volkswagen will be cutting up to 23,000 jobs via natural fluctuation and partial early retirement, taking the demographic curve into account. It is expressly stated that this reduction in the workforce will be accomplished without compulsory redundancies.
  • The pact for the future includes agreements on new future-oriented vehicle products. The plants at Wolfsburg and Zwickau are to assume responsibility for the production of electric vehicles based on the Modular Electric Drive Kit (MEB). By investing in e-mobility, Volkswagen will create jobs with a secure future at these locations. In order to ensure efficient capacity deployment, a further model is to be produced at the Emden plant. At Wolfsburg, an additional Volkswagen Group vehicle will also be produced.
  • Future-oriented work is to be divided between the main German components plants. Brunswick will continue to produce the battery system for the Modular Transverse Toolkit and will also be developing and producing the battery system for the Modular Electric Drive Kit (MEB). Kassel is to develop the MEB drive system and to be responsible for the assembly of the entire system in addition to electric transmission production. Salzgitter will produce and supply MEB drive system components. In addition, the plant will be building a pilot facility for battery cells and cell modules.
VW also recently took the wraps of the updated ~124 mile Volkswagen e-Golf...which will also be getting a generation/battery upgrade in the near future

VW also recently took the wraps of the updated ~124 mile Volkswagen e-Golf…which will also be getting a generation/battery upgrade in the near future

Volkswagen I.D.

Volkswagen I.D.

The Chairman of the Brand Board of Management, Dr. Herbert Diess, said:

“With the pact for the future, Volkswagen will be taking a major step forwards. The pact represents a fundamental transformation of the value stream, the development of new competences and strategic investment.

We will be strengthening the company’s economic viability and competitiveness and will be safeguarding the future of our plants. The socially compatible loss of jobs will be offset by the creation of jobs in other units.” Diess emphasized that Volkswagen would be concentrating consistently on the future of the automotive industry.

“We will be transforming the entire brand and making it fit for the fundamental transformation of our industry. At Volkswagen, we are taking our future into our hands.”

General Works Council Chairman Bernd Osterloh said:

“The most important news is that the workplaces of our permanent workforce will be safeguarded. We have agreed that compulsory redundancies are to be excluded up to the end of 2025. In view of what is happening at other companies, this is a considerable success in troubled times.

With the pact for the future, we will be entering the field of next-generation e-mobility. The new cars based on the Modular Electric Drive Kit and electric components from our plants will make our German locations pioneers of electrification within the Volkswagen Group. The Works Council has ensured that these future-oriented vehicles will be made in Germany and not in other countries. Of course, the pact for the future has positive and negative aspects. However, it represents an acceptable compromise for both parties, reached after a long struggle. We have now achieved a reasonable result.”

$10 says the doors on the Volkswagen I.D. don't live to see production

$10 says the doors on the Volkswagen I.D. don’t live to see production

Dr. Karlheinz Blessing, Member of the Board of Management responsible for Human Resources, said:

“The implementation of the pact for the future will bring major changes for many of our employees. They will need to obtain additional qualifications, learn new ways of working and assume new responsibilities. But the effort will be worthwhile: we will make Volkswagen slimmer, faster and stronger, safeguarding employment in Germany in the long term.”

Hat tip to Josh B!

Categories: Volkswagen

Tags: ,

Leave a Reply

38 Comments on "VW To Invest $3.7 Billion Into Electric Future, Cuts 23,000 Jobs At Same Time Due To EV Efficiency"

newest oldest most voted

When an area needs less workers than before to meet the same results, that’s a positive thing.

For whom? Not laid off workers. You are correct but there is a social cost if new jobs are not created to rreplace the old. Especially with self driving cars which are obviously about to massively displace jobs (see recent Tesla Autopilot 2.0 video). Even Elon Musk has stated a guaranteed basic income might be worth looking at.

Ultimately, per capita productivity is how wealth is generated so, strictly speaking, social cost from redundancy occurs only as a result of a weakness in the socioeconomic system.

This is a simple fact but oh how many don’t understand that.

But you won’t get any popularity points as a politician trying to get people to understand that…

Which is why progress has never arisen from politics.

I don’t think I understand it, at least not in this context. Is the “weakness in the socioeconomic system” our relative inability to distribute wealth?

Also, isn’t the per capita productivity (of Germany in this case) essentially the same unless you assume that all of the jobs that go away are replaced somewhere else?

Glad to get an economics lesson 🙂

No lay offs, just natural attrition through retirements.
It is in the article.

“23,000 Jobs At Same Time Due To EV Efficiency” … in the future maybe.

They killed 30,000 jobs due to diesel cheating here and NOW.

..the Establishment/Mike Pence side of the Republican argument. VW’s shares weren’t moved much, and for those cheering employment reduction, 25-30k of slow attrition, wasn’t enough. VW’s global workforce is, what, ~600k?

Apart from pushing the environment aside, trade and finance are the two areas causing angst within the ‘R’s these days. Democrats had the microphone for financial reform. Now, they have Chuck Schumer. 8 years?

Every OEM will have this type of announcement sometime in the next 10 years. VW got strong-armed into it early because of Dieselgate.

23K less jobs at VW, but how many less will result at suppliers too?

Easy the suppliers will have to conform to the needs of electrification just like coal miners need to be building solar panels instead of crying about the demise of their industry.

That didn’t answer my question. If you make say, engine blocks for VW, and now they don’t use that engine block anymore, it’s not like you are suddenly going to start making battery cells. I’d like to see an actual # on the snowball effect this transition will cause. Now, I’m not saying the transition is a bad thing, just want to bring up the consequences will be bigger than just 23K jobs.

You need a guy, like Mark Zandi, who backed up the GM-bankruptcy supposition with follow-through unemployment expected to reach 3.2mm people. Do you speak German?

Suppliers should be scared very very scared of the BEV as it will pit many of them out of business…
I read before that the averag ICE car has 30,000 parts and the average BEV has 20,000 parts…
VWs job cuts are only the beginning for them and all manufactures who will have to cut 10s of 1000s of jobs once BEVs take off…

The article below has a couple of quotes from the German Post Office who is making there own EV vans…
That fact also tells you how easy it is to stat an auto company today as parts suppliers will do half the work for you…

http://fortune.com/2016/10/06/volkswagen-electric-van-2/
“Electric vehicles, which are far simpler in design than combustion engined cars, require only a tenth of the staff during assembly, dramatically lowering production costs.”
“For commercial reasons he wouldn’t put a price on the Streetscooter, but said: “It did not cost billions to develop and produce. You will not believe how cheap it is to make.””

If I am a coal miner out of a job, how exactly do I go about making solar panels?

Yeah, good one. It easy to say that, but to get coal miners to make that transition, it’s extremely difficult.

The idea of transformation is a variation of “the market solves all”. No mention is made of the real pain and suffering for individuals.

It’s naturally way better to state that ‘everything will be alright and coal will be here for decades to come’ while ignoring the ‘problem’ altogether.

Nobody stated that.

I think EVs are likely to cause a shift of production to suppliers. GM Bolt is an example, often referred to as “LG Bolt”. FCA’s Marchionne publicly frets about what he calls “disintermediation” .

So it seems to me that jobs loss at VW might actually be the result of a shift of workload to suppliers. A lot depends on whether VW decides to make battery cells and packs itself or just outsource it. Looks like it has a hard time making up its mind about that. It’s not immediately obvious to me that assembling a battery pack would need less personnel than assembling engines BTW.

Depends on ones point of view ie worker or company.

I wonder when the 2019 300 mile cars will actually hit the showrooms. 300 mile midsize ev in a couple of years seems pretty aggressive.

i can’t help but be suspicious that this is an attempt to put job cuts in a most favorable light, by putting it under the guise of “repositioning”. given the kinds of fines that have hit volkswagen AG recently (not to mention the sales hits that they have taken on some of their products), i wonder how many of these “redundancies” would have been discovered in any event? i mean, the diesel product line was going to take a big hit anyway.

No kidding.

Everybody in the world who specializes on internal combustion engines today will have to requalify within their lifetime.

I seems a bit disingenuous to blame evs for job cuts when most of VW’s money problems have evolved from their emissions falsification on their diesel models.

They still think that people are dumb and believe everything VW says.
EV market is growing strong. That’s why Tesla is hiring lots of people.
The truth is actually: EVs? we can’t do it!

Another Euro point of view
“The truth is actually: EVs? we can’t do it!”. VW laying of 23K workers is perhaps evidencing the exact opposite. Today’s fastest EV (beyond 400m) was almost literaly made in a garage (Rimac). Probably one of the reason why we see so many small start ups giving a shot at making EVs is their sheer simplicity. I don’t recall a start up giving a shot at making a car like a Toyota Prius PHEV, a Chevy Volt or BMW i8. Coupling an ICE and a electric motors in a reliable and efficient way is hugely challenging. Recently Toyota put in place an EV development team and decided 4 engineers was sufficient, I would be very curious to know how many engineers worked on the Prius prime project. Team that developed the Jaguar i-pace was small too. This is probably the reason why Tesla is pushing the self driving technology so much, as to keep a technological edge that just not present in a plain does not exist in a EV drivetrain. Now that said it is likely that developing an EV that can make a full high speed Nurburring lap (about 8 minutes) without blowing up to pieces is on… Read more »

Not to fret a Chinese vaporware company (NextEV) has crushed Nurburring in less than 8 minutes…
I beleive the Croation Rimac Concept_One has also done it…

https://electrek.co/2016/11/21/nextev-nio-ep9-electric-1-mw-supercar/

“On October 12th 2016, the EP9 achieved a new lap record at the Nürburgring Nordschliefe by racing the 20.8km ‘Green Hell’ in 7m 05.12s:”

Another Euro point of view

Thanks for info ! Lets say then that it should be a car produced in meaningful quantities, no supercar category.

Another Euro point of view

(About Nordshchleif EV record) Aaahhh all those companies making vaporware EV’s, what a nuisance….. 🙂

U just don’t get it, don’t u?
That is the problem: EV tech is simple. That is, they can’t fool anybody with it and they can’t build it so it can compete with other EV manufacturers on the market, that’s the point.

In other words, they don’t see any chance to make money out of it.

Get it now?

Perhaps new jobs will be created in EV infrastructure and renewable energy. Germany’s unemployment is not too bad anyways and the social safety net better than lots of other places. But the above comments about other automakers shedding jobs (in the US?) are probably right on. Hey, at least Tesla is growing. Obviously the challenge is to stay relevant in the new economy.

There is no doubt the future is electric. Hydrogen didn’t work out and we certainly can’t comtinue burning fossil fuels. So the BEV is where it’s at.
If you want to continue be a leading car manufacturer now is the time to place your bets. Those who are ready for EV mass production in 2020 are going to have a massive advantage over those who are dragging their feet now.

I’m sure pure EV’s are less complicated and require less labor, but VW/Audi seems to be heavy on PHEV’s in their pipeline. And they would actually take more labor, because they have 2 drivetrains.

According to goodcarbadcar, Volkswagen has dropped to #15, with deep decreases in sales in the US:

Oct 2016 vs. 2015: 24,779 -18.5%

Year To Date 2016 vs. 2015: 256,047 -13.1%

I wonder if they are trying to hide layoffs due to poor sales as if they were the fault of EV’s and not just a big drop in sales.

The staff reductions are supposed to be from retirments and employes quiting over the next several years and not from layoffs…
The US is one country in a big big world and VW is on track to pass Toyota as the largest auto manufacture in the world so the staff reductions have nothing to do with poor sales…
VW is also having major sales probelms in Brazil due to some sort of production issue…
And the US is actualy a small market for VW…

http://bestsellingcarsblog.com/ gives sales for around the world but you have to look at them within a couple of days of posting or pay for access…

So what, 23000 jobs seize to exist as they are no longer needed. That’s called progress, when work can be done more efficiently by fewer people. Considering that among the 120k VW employees in Germany around 30-40k work in administration (!), not R&D or manufacturing, surely some positions are clearly not really necessary. Besides, the guys were retiring anyway. Markets change with time, otherwise we would not discuss EVs here, but rather would stand out in the street debating which breed is the best horse and what to feed it so it does pull the familiy carriage in a godfearing manner (basically like the Amish).