Volkswagen to cut 20,000 jobs as part of restructuring plan

Volkswagen to cut 20,000 jobs as part of restructuring plan

	Published : Sat, 11 Feb 2006 14:05 By : Andrew Stead Print this Story

FRANKFURT: German carmaker Volkswagen AG is bracing to eliminate up to 20,000 jobs in the next three years as part of a major restructuring programme, the company announced Friday. The programme involves a cut in production capacity, it added.

Besides, the company envisages a complete reorganisation of its car parts business, improvement of productivity and full utilisation of its plants.

In a statement, the company said both direct and indirect employees in the Volkswagen passenger car brand will be affected by the downsizing.

Volkswagen's chief executive Bernd Pischetsrieder said later the company does not intend to close down any production facility or cancel an in-house wage agreement that protects the company's 100,000 highly-paid workers at its six western German plants from layoffs through the end of 2011. It will rather "adjust" capacity at the plants.

Pischetsrieder said it will achieve the job cuts through a series of early retirement and voluntary termination packages, costing the company several million euros.

The company employs more than 340,000 workers worldwide. It did not give details or any break-up the job cuts.

The announcement came as the company reported a preliminary net profit of 1.1 billion euros for 2005, which is an increase of 61 per cent from 697 million euros a year earlier. This has topped forecasts of 834 million euros. Sales rose 7 per cent to 95.27 billion euros, compared with 88.96 billion euros in 2004, while operating profit increased to 2.79 billion euros from 1.64 billion euros. It sold 5.24 million vehicles, an increase of 3.2 per cent.

The company will come out with its final financials in early March.

Pischetsrieder insisted the primary aim of the programme is not to cut jobs, but to raise productivity up to international standards.

Analysts were not surprised by the announcement. They said it is normal for the company to save money so that it could spend more money developing new models for American buyers.

The company's cost cutting programme had come into being last year, starting with its decision to build its new sports utility vehicle in Germany only after the labour groups agreed to reduce production costs.

Volkswagen is planning a 2-billion-euro bond buyback programme and is proposing to raise its dividend by 10 per cent to 1.15 euros.

Its shares rose 5.20 euros, or 10 per cent, to 55.82 euros.