A major automaker could be cutting 25,000 jobs

Before you go, we thought you'd like these...
Before you go close icon

Volkswagen's 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."

Learn about the evolution of Volkswagen:

History of Volkswagen
See Gallery
History of Volkswagen
circa 1950: Rows of ' Beetle ' cars at a German Volkswagen plant. (Photo by Fox Photos/Getty Images)
View of a Volkswagen Beetle, 1960s. (Photo by Hulton Archive/Getty Images)
circa 1975: Volkswagen Beetle cars parked. (Photo by Keystone/Getty Images)
DETROIT, UNITED STATES: Members of the media surround the new Volkswagen Beetle after its introduction 05 January at the North American International Auto Show in Detroit, Michigan. The Beetle, the best selling car in history, is being offered on the US market after a 19 year absence. AFP PHOTO/Matt CAMPBELL (Photo credit should read MATT CAMPBELL/AFP/Getty Images)
The New 1999 Beetle From Volkswagon. The Trademark Beetle Body Shape Is Immediately Recognizable, Though It Shares No Parts With The Old Beetle. It's Both Larger (161.1 Inches In Length And 96.3 Cubic Feet Inside) And More Powerful Than Its Predecessor And The Engine Is No Longer In The Back. The Car Is Available With A New Turbocharged 150-Horsepower 1.8-Liter Four-Cylinder Engine, A 115-Horsepower 2.0-Liter Four-Banger Or A High-Tech Turbo Direct Injection Diesel Engine That Gets 48 Mpg On The Highway And Has A Driving Range Of 700 Miles. The New Beetle's A Truly Modern Volkswagen, With A Fully Galvanized Body And German Engineered Suspension. Plus A Security System, Airbags* And 6-Speaker Cassette Stereo. (Photo By Getty Images)
NUERBURGRING, GERMANY - OCTOBER 07: INTERNATIONALES ADAC EIFFELRENNEN 2000 Nuerburgring; VW NEW BEETLE CUP (Photo by Christof Koepsel/Bongarts/Getty Images)
384066 02: FILE PHOTO: The new Volkswagen 'Microbus' concept vehicle is displayed for this publicity photo. The Microbus was introduced January 7, 2001 at the North American International Auto Show in Detroit, MI. (Photo courtesy of Volkswagen/Newsmakers)
398508 01: UNDATED FILE PHOTO A redesigned Volkswagen Beetle is displayed in this undated file photograph. Volkswagen officially opened a new assembly hall near Dresden, Germany, December 11, 2001 to produce the new Phaeton luxury car, which represents a dramatic new step for the German car company away from its traditional medium and small car market. (Photo courtesy Volkswagen AG/Getty Images)
A worker walks past a Polo car at a production line in Shanghai Volkswagen Automotive Company, 09 June 2003. One out of every 120 Chinese now own their own car as the government announced that there were more than 10 million privately owned cars plying Chinese roads, state press said. AFP PHOTO/LIU Jin (Photo credit should read LIU JIN/AFP/Getty Images)
SYDNEY, AUSTRALIA - OCTOBER 16: The Volkswagen Golf R32 on display during the Sydney International Motorshow at the Sydney Exhibition Centre October 16, 2003 in Sydney, Australia. The Sydney International Motorshow is the largest collection of automobiles on show in Australia with sixty new production models unveiled and concept vehicles on display. (Photo by Cameron Spencer/Getty Images)
DETROIT - JANUARY 5: Volkswagen displays the Concept T vehicle at the North American International Auto Show January 5, 2004 in Detroit, Michigan. The show, which will feature more than 700 vehicles, opens to the public January 10. (Photo by Bryan Mitchell/Getty Images)
ZOUERAT, MAURITANIA: Finnish Juha Kankkunen drives his Volkswagen Touareg 05 January 2005, during the sixth stage of the 27th Dakar Rally between Smara and Zouerat in Mauritania. Reigning champion Stephane Peterhansel of France won the stage. Peterhansel, hampered by a cold for two days, crossed the finishing line in 4hr 0min 29sec to beat out fellow Mitsubishi driver, and two-time champion, Hiroshi Masuoka of Japan by 5min 58sec and the Volkswagen of Bruno Saby by 7min 26sec. AFP PHOTO MARTIN BUREAU (Photo credit should read MARTIN BUREAU/AFP/Getty Images)
A line of 2006 Volkswagen Jetta GLI sedans sits on the lot of a Volkswagen dealership in the west Denver suburb of Lakewood, Colo., on Thursday, June 29, 2006. High gas prices continued to pull down sales by domestic automakers in June, while Toyota Motor Corp. credited the company's 14.4 percent sales boost to its many fuel-efficient offerings. (AP Photo/David Zalubowski)
Chinese men look at Volkswagen cars on a sales yard in Beijing in this March 31, 2006 file photo. (AP Photo/Greg Baker, File)
Unsold 2007 New Beetles sit in a long row on the back lot of a Volkswagen dealership in the west Denver suburb of Lakewood, Colo., on Tuesday, April 17, 2007. Volkswagen of America Inc. on Friday, June 1, 2007 reported U.S. sales rose 6.3 percent in May 2007 compared with May 2006, according to Autodata Corp. (AP Photo/David Zalubowski)
WOLFSBURG, GERMANY - MARCH 13: (L-R) Volkswagen Board members Detlef Wittig, Francisco Javier Garcia Sanz, Horst Neumann, Martin Winterkorn, Chairman of German automaker Volkswagen, Jochem Heizmann and CFO Hans Dieter Poetsch pose at the new Volkswagen model 'Scirocco' during the company's annual press conference on March 13, 2008 in Wolfsburg, Germany. The Volkswagen Group significantly increased its earnings last year. Profit before tax therefore grew to 6.5 billion euros. (Photo by Andreas Rentz/Getty Images)
A new 2010 Volkswagen Beetle convertible, right, is seen at the Los Angeles Auto Show in Los Angeles on Thursday, Nov. 20, 2008. The 2010 model will go on sale in Spring 2009. (AP Photo/Damian Dovarganes)
A SEAT Cupra is shown during the Volkswagen Group Night held in China's National Aquatic Center, also known as the "Water Cube", in Beijing, Sunday, April 22, 2012. (AP Photo/Alexander F. Yuan)
Volkswagen introduces the Golf R SportsWagon during the Los Angeles Auto Show on Wednesday, Nov. 19, 2014, in Los Angeles. The annual event is open to the public beginning Nov. 21. (AP Photo/Chris Carlson)
The new Volkswagen Passat is displayed during a reveal event at the Brooklyn Navy Yard, Monday, Sept. 21, 2015, in New York. (AP Photo/Kevin Hagen)

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.

There appears to be common ground on opting for retirement to cut staff, two sources at VW familiar with the talks said on Wednesday, but VW management and the workers were at odds over other issues.

Management wants to trim back white-collar staff which account for about two thirds of Wolfsburg's 60,000 jobs including administration, R&D, sales and marketing, one of the sources said.

But workers are angry about management attempts to outsource services such as plant security, IT support and catering at a division in Wolfsburg, they said. Workers also oppose moves to scrap a longstanding practice of allowing foremen to switch to higher-paid non-production jobs, the sources said.

VW declined to comment.

Osterloh, seeking to raise pressure on management, has invited workers and executives to a special staff conference on Oct. 20 in Wolfsburg to brief the rank and file on the talks, which are due to be concluded in November.

($1 = 0.8928 euros)

(Reporting by Andreas Cremer; Editing by Kenneth Maxwell and Jane Merriman)

Read Full Story

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

People are Reading