Volkswagen is reportedly in the midst of one of its biggest restructurings and one that could ultimately wipe out as many as 100,000 jobs globally. That is not just a matter of conventional automakers having to convert from internal combustion engine vehicles to electric vehicles.
The job cuts may be part of Volkswagen’s efforts to reduce costs and remain competitive in the automotive industry at large. And while the company has not framed the restructuring as layoffs, analysts said layoffs of 7,000 workers through voluntary retirement programs, attrition and reorganisation could amount to six figures in the next few years.
Why did Volkswagen restructure?
The automotive industry is going through its biggest transformation in more than a century. Electric vehicles (EVs), digital mobility services, and software-driven vehicles are also forcing manufacturers to rethink how they do business.
Electric vehicles have fewer moving parts and generally require fewer labour hours to build than gasoline and diesel vehicles. A result of this is that automakers are in an era of overcapacity and workforce requirements built for a different era.
Volkswagen is investing billions of euros in electric vehicle development, battery technology, software platforms, and next-generation mobility solutions. To help fund these investments and stay profitable, the company is looking to streamline operations and reduce costs across different departments.
Growing Pressure from Global Competition
The competition from new EV companies and established competitors is on Volkswagen’s side. Chinese electric vehicle companies have launched aggressively, and Tesla is still driving innovation and production efficiency.
In Europe, slower electric vehicle demand in some markets, increasing production costs and economic uncertainty have also added pressure. And so far, stronger environmental regulations are also forcing carmakers to make a move away from fossil-fuel-powered vehicles faster.
These factors have forced Volkswagen to assess its manufacturing footprint, its workforce, business model and future business strategy.
Impact on Employees and Operations
Some reports suggest that the restructuring may impact administrative, engineering, manufacturing, and support roles. But much of the workforce reduction can be achieved through voluntary separation packages, early retirement schemes, and natural attrition rather than large-scale compulsory layoffs.
The firm’s global operations are also being optimised so that production is higher at several facilities in general.
Labour unions, whose influence is very strong in Volkswagen, will be key in the implementation of any workforce reductions. Negotiations between management and employees will determine the extent of the restructuring plan.
A Defining Moment for Volkswagen
Volkswagen has been one of the world’s largest car manufacturers for decades and one of the symbols of German industrial power for years. But electric mobility is a challenge for the company.
Experts in the automotive industry say Volkswagen’s restructuring is in line with what industry players think is a general trend in the auto industry. Workforce adjustments by manufacturers, as they move in line with the latest technologies, automation, and consumer preferences, are becoming more common.
In the face of the prospect of 100,000 job cuts, Volkswagen’s leadership insists that changes must be made to cement its long-term competitiveness and sustainability in the global automotive market.
The next few years will determine whether Volkswagen’s extensive reorganisation will succeed in positioning Volkswagen for the next generation of mobility and balancing the interests of employees, investors, and customers.
