New cars based on the modular electric drive kit and electric components will make German locations pioneers of electrification within the VW group

New cars based on the modular electric drive kit and electric components will make German locations pioneers of electrification within the VW group

Volkswagen has announced a new pact with its works council which will see 23,000 jobs go, by natural attrition, but another 9,000 created in new areas as it transforms "from a pure automaker into a successful mobility service provider in the age of digitalization and increasing e-mobility".

It expects a positive impact on annual earnings of EUR3.7bn from 2020.

"This pact will initiate the return of the Volkswagen brand to a path of profitable growth," VW said in a statement. "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.

"By 2020, the Volkswagen brand intends to be completely repositioned."

Over the next few years, investments of about EUR3.5bn in future-oriented areas of these facilities are planned which will result in the creation of 9,000 jobs. 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".

Brand board of management chairman 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.

"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."

He said new cars based on the modular electric drive kit and electric components would make 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."

Savings and efficiency improvements in all areas and at all locations in Germany should positively affect annual earnings by about EUR3bn from 2020 onwards. Regions outside Germany will will contribute about EUR700m per year.

The pact for the future is to improve the productivity of the German plants by about 25% and to increase the operating margin to 4% by 2020.

The automaker will be making a "massive" investment in new technologies with German plants 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. It will be spending EUR3.5bn on the transformation of the company.

New competencies 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. VW will, however, mainly be filling these vacancies with existing employees and will also be recruiting specialists from outside the group. Over the next few years, it will cut up to 23,000 jobs via natural fluctuation and partial early retirement, taking the demographic curve into account. VW insists this reduction in the workforce will be accomplished without compulsory redundancies

Plants at Wolfsburg and Zwickau are to assume responsibility for the production of electric vehicles based on the modular electric drive kit (MEB). In order to ensure efficient capacity use, a further model is to be produced at Emden. At Wolfsburg, an additional 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 toolkit and will also be developing and producing the battery system for the electric drive kit. 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.

"Implementation of the pact for the future is to start immediately and the targets mentioned are binding. Progress with the efficiency improvement measures and the agreed investment in the future will be continually reviewed over the next three years," VW said.

See also: VW wants cost cut deal by Friday

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