Car maker to cut 30,000 jobs in huge post-dieselgate revamp

Volkswagen on Friday announced the biggest revamp in its history, cutting 30,000 jobs in a huge savings plan to help the German auto giant recover from the dieselgate emissions cheating scandal.

The deal, agreed with workers' representatives after months of tortuous negotiations, will lead to annual savings of 3.7 billion euros ($3.9 billion) by 2020 and will allow the group to ramp up its investment in electric vehicles, VW brand chief Herbert Diess said.

"It's a major step forward, and undoubtedly one of the biggest in the history of the company," Diess told a press conference at the group's Wolfsburg headquarters in northern Germany.

Some 23,000 of the job cuts will be in Germany alone, Diess said, adding that these would be mostly through measures such as attrition and temp job losses and not through forced lay-offs.

Jobs will also be lost in Brazil and Argentina, two markets where the VW brand is struggling.

"I am very sorry for those affected, but the situation of the brand at the moment gives us little room for manoeuvre," Diess added.

The so-called "Future Pact" agreed with labour leaders will also see VW create 9,000 positions in areas of new technology, as part of the group's shift to electric vehicles in the wake of dieselgate.

'VW can change'

"We are tackling the problems at the root, even if it's painful. Many didn't think we could do it," Diess said. "Today, we have shown that Volkswagen can and will change."

VW's own-brand unit, which employs 215,000 people worldwide, had already been struggling with profitability, weighed down by high costs and low productivity.

But the VW group, which owns 12 brands, was plunged into the biggest crisis in its history last year after it admitted to installing emissions cheating software in some 11 million diesel vehicles.

The so-called defeat devices could detect when a vehicle was undergoing regulatory tests and lowered emissions accordingly to make the cars seem less polluting than they were.

The crisis hurt sales and damaged the image of the proud German company, pushing it to its first loss in over two decades last year.

In response to the controversy and to burnish its environmental credentials, VW has revved up its focus on clean energy cars, announcing plans to develop and manufacture more than 30 new electric vehicles by 2025.

As part of the shift to new technologies, Diess said VW would invest some 3.5 billion euros in Germany over the next four years in projects focussed on e-mobility, digitalisation and automation -- including self-driving cars.

Costly legal woes

Top worker representative Bernd Osterloh said the radical shake-up had "positive and negative aspects", but he welcomed that German plants would be at the forefront of manufacturing VW's electric vehicles.

"These future-oriented vehicles will be made in Germany and not in other countries," he said in a statement.

Analyst Ferdinand Dudenhoeffer, an expert on the German auto industry, told n-tv rolling news channel that VW was on the right track with its massive restructuring plan.

"It's painful but it's the right decision," he said.

The VW group has set aside some 18 billion euros to cover the fallout of the dieselgate scandal, but experts believe the final bill for the buy-backs, fixes and legal costs will be far higher.

Last month the carmaker agreed a $14.7 billion settlement with authorities in the United States that includes compensation for nearly half a million owners of the affected cars.

But VW still faces a web of investigations and legal claims around the world.

The group's shares gained 0.64 percent to 118.30 euros in afternoon trading in Frankfurt, outperforming the overall market, which was up by 0.30 percent.