VW Announces Deep Restructuring As 2005 Profits Speed Ahead

Up to 20,000 employees at German car giant Volkswagen feared for their jobs Feb. 10 as the carmaker unveiled deep restructuring plans, even as profits sped ahead last year. "In order to boost the wholly unsatisfactory level of profitability of the VW passenger car brand, an extensive restructuring program has been drawn up," Europe's biggest carmaker said.

A company spokesman declined to specify exactly how the employees concerned might be affected and explicitly refused to say if - or how many -- jobs might be on the line as part of the shake-up.

Newspaper reports suggested that the restructuring would entail the sale of components plants, which would automatically reduce the group's headcount. Given the "extremely tense economic situation, earnings of the VW brand were only just above breakeven," VW explained. "In particular, the export capability of the German VW plants is not ensured," said chairman Bernd Pischetsrieder.

"We continue to incur significant losses on cars exported from Germany to the US. In order to ensure a secure long term future for the group, we must act rapidly and determinedly to eliminate the problems that we face." VW said the measures would include "elimination of productivity deficits, particularly in the car assembly plant."
The components manufacturing business would be "reorganized", labor costs made "more competitive" and capacity utilization boosted, it said.

Chairman Pischetsrieder pointed to an agreement reached with unions in November 2004, whereby management had pledged to guarantee around 100,000 jobs at the carmaker's German plants until 2011. "The management board stands by" that agreement, he said.

Nevertheless, the carmaker was finding it difficult to ensure the competitiveness of the group and its employees. "This is not possible with the current conditions," it complained. "For this reason, Volkswagen aims to conduct negotiations with the works council and the IG Metall trade union rapidly with a view to finding the best way of reaching these targets."

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