VW could cut 25,000 jobs over 10 years as workers retire

Wed Oct 12, 2016 12:04pm EDT
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BERLIN (Reuters) - Volkswagen's (VOWG_p.DE: Quote) works council chief said the company could cut up to 25,000 staff over the next decade as older workers retire to help the carmaker achieve cost-cuts needed to revive the VW brand.

The German group's top executives have been in talks with works council leaders representing VW staff since June in an attempt to agree cost savings to fund the carmaker's post-dieselgate shift to electric vehicles.

Volkswagen is under pressure to make cuts at high-cost operations in Germany to fund this transformation, while still grappling with billions in costs for its emissions scandal.

Waiting for staff to retire is a more attractive option for VW workers than actual layoffs.

"We have the huge benefit of the baby boomer age groups," VW labour boss Bernd Osterloh told Handelsblatt on Wednesday in remarks confirmed by the works council. "That's why we can also say the jobs of VW workers are safe."

Volkswagen has said tens of thousands of staff from the 1950s and 1960s baby boomer generation will come up for retirement in coming years. VW declined to comment on Osterloh's 25,000 target, which would represent about a fifth of the company's workforce in Germany.

Analysts said the cost savings from staff cuts of up to 25,000 would be a solid start, but must be accompanied by a reduction in purchasing costs and R&D spending to ensure a turnaround of the carmaker's operations.

"VW has no choice but to bring down costs massively if it wants to put its business on a sound footing," Evercore ISI analyst Arndt Ellinghorst said. VW must achieve cost savings of about 22 billion euros ($24.64 billion) globally in coming years, three quarters of which must be invested in its transformation, said Ellinghorst, who has a "buy" recommendation on the stock.

Ellinghorst also said VW could reap up to 2.5 billion euros by moving workers into early retirement, a "massive" gain for the VW brand which may only make operating profit of about 2 billion euros in 2016 after 2.1 billion in 2015.   Continued...

Volkswagen CEO Matthias Mueller and Stephan Weil (C) Prime Minister of Lower Saxony and member of the VW Supervisory board look at the Golf 7 production line during a tour of the VW factory in Wolfsburg, Germany October 21, 2015.  REUTERS/Julien Stratenschulte/Pool