Published: Sat, November 19, 2016
Economy | By Melissa Porter

Volkswagen to shed 30000 jobs to cut costs after scandal

The agreement, details of which are to be announced at a news conference at Friday morning, foresees 3.7 billion euros ($3.9 billion) in annual savings at VW's namesake brand, which will involve 23,000 job cuts in Germany alone, another source said.

The company has agreed to pay $15bn in a settlement with United States authorities and owners of around 500,000 vehicles.

Volkswagen and its powerful labor unions agreed to cut 30,000 jobs at the core VW brand in exchange for avoiding forced redundancies in Germany until 2025, a compromise which leaves the carmaker's profitability still lagging rivals. In addition to Volkswagen, the company also makes cars under other brands including Porsche, Audi, SEAT, Skoda and Lamborghini. Around 11 million cars worldwide have the deceptive software.

Volkswagen, with 624,000 employees around the world, sells roughly the same number of cars as Toyota and General Motors - around 10 million a year.

Volkswagen will also build battery packs for electric and hybrid cars at its plant in Braunschweig, the company said.

The cuts will mainly fall on its 120,000-strong factory workforce in Germany.

Reports of VW Group and the IG Metall engineering union planning job cuts already emerged before the "Dieselgate" emissions scandal erupted, but the aftermath of the crisis will certainly have expedited the process.

By 2020, the company aims to increase its earnings by €3.7bn per year in an effort to reclaim some of the profits lost by the scandal.

The works council's chairman, Bernd Osterloh, said it had "ensured that these future vehicles are built in Germany and not overseas".

Analysts and investors nonetheless welcomed the deal, sending the share more than 2 percent higher to the top of the blue-chip DAX .GDAXI index in early Frankfurt trading.

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