Scandal-Plagued VW Slashes Costs And Jobs As It Recovers From Dieselgate

REUTERS/Mark Blinch

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Chris White Tech Reporter
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Volkswagen employees have accused the scandal-plagued company of slashing jobs and cutting costs beyond what it had previously promised.

VW’s labor bosses halted cooperation with the company’s management on issues such as raising weekly hours for engineers – they are also accusing executives of pushing for savings beyond what it promised earlier this year.

The German automaker and labor leaders agreed in November to dumping 30,000 jobs at the VW division in exchange for several labor friendly deals at the company’s German base. The job cuts, along with the other cost slashing measures, will still leave VW’s profitability lagging behind competitors, PSA Group and Toyota.

Still, the changes are unlikely to make a dent in the company’s cost overruns. Labor leaders are accusing VW’s brand chief Herbert Diess, who was considered a cost cutting king at BMW, of trying to temporarily cut jobs more steeply than initially promised.

VW started making headway last year in cutting fixed costs and raising productivity, Diess said, even as the company’s core units – the Passat and Golf – slashed sales numbers.

The company’s fight to cut fixed costs is no doubt a result of last year’s dieselgate scandal, which involved allegations VW affixed so-called defeat devices in hundreds of thousands of diesel-powered vehicles in the U.S. The devices would only kick on during road conditions when emission measuring tools were not engaged.

VW eventually agreed to pays back owners of the most expensive vehicles affected, bringing costs associated with the scandal to $24.3 billion in North America. It covers 75,000 Audi, VW and Porsche vehicles with 3.0-liter diesel engines.

Customers with older models that cannot be altered will be offered buybacks instead of fixes, while owners with newer vehicles will receive $16,114. If VW cannot find an effective fix, then buybacks could balloon above $4.04 billion, increasing the final cost above $25 billion.

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