Tuesday, September 6, 2005

VW to cut jobs among 'several thousand' surplus German employees

Move comes despite rising demand for its cars

By Stephen Graham / Associated Press

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BERLIN -- German automaker Volkswagen AG said Monday it plans to cut its work force in its home country, complaining that its factories have "several thousand" surplus employees, despite rising demand for its cars.

Volkswagen said it would extend early retirement programs, allow more staff to work part-time and offer incentives to persuade others to leave in order to trim its employment costs.

The Wolfsburg-based company, which has agreements with labor unions that rule out firing any workers in Germany until 2011, did not say how many of its 103,000 jobs in the country would go or when. Still, the news sent its shares soaring.

"Despite rising sales, the Volkswagen Group still has considerable overcapacity," a VW statement said. "These measures apply to employees in all areas, including senior managers."

Volkswagen indicated earlier this year it would step up a cost-cutting drive amid criticism from investors that the company was inefficient. Quality problems are also plaguing its North American operations.

In July, the company announced a 6.7 percent fall in second-quarter profit, though improved operating earnings and stronger sales in Europe suggested that it was turning the corner.

It is also under pressure from a fraud scandal which has forced out several top officials and prompted an investigation by German prosecutors.

In its statement, VW suggested the job cuts could be made largely at its flagship plant in Wolfsburg, even if it is chosen to produce a new compact sports utility vehicle.

"This would be an important decision for the site," the company said "However, it would not alter the fact that Volkswagen has surplus manpower of the order of several thousand employees at its German sites, in particular Wolfsburg."

Chief Executive Bernd Pischetsrieder explained the move to workers in Wolfsburg on Monday, saying that while new models such the revamped VW Golf had lifted sales, competition was fierce.

"Given competitive pressure worldwide, we need far-reaching cost reductions in all areas. This also goes for personnel costs," he told a works meeting, according to the company.

That would be achieved "either through lower costs per worker, through fewer workers, or a combination of both," Pischetsrieder said.

On the weekend, news magazine Der Spiegel reported that 10,000 Volkswagen jobs in Germany were at risk. Volkswagen refused to comment on that figure. Pischetsrieder earlier this year suggested some 6,000 jobs could go.

The new SUV could only be built in Wolfsburg at costs below those laid out in existing wage agreements, he said. VW has suggested that it could opt instead for a plant in Portugal if labor unions do not agree.

Shares in Volkswagen, whose brands also include Skoda, Audi and SEAT, were up 1.9 percent at 43.23 euros ($54.18) in afternoon trading in Frankfurt, among the strongest performers on Germany's blue chip DAX index.

AP-CS-09-05-05 1046EDT