On Monday, Volkswagen, Europe’s largest carmaker, announced to German unions that there was a huge surplus of workers in the country.
The statement given by chief executive Bernd Pischetsrieder explained the problems Volkswagen is having with German facilities.
In the past, Volkswagen has mentioned reducing its current workforce, but the number Volkswagen planned to fire was kept internal until recently.
Mr. Pischetsrieder announced on Monday in a shop floor meeting that Volkswagen has several thousand employees whose service are no longer needed.
Volkswagen headquarters, the world’s largest car plant, has been reported to have the largest number of unneeded workers of any European facility.
The company has allowed the overcapacity issue to aid in its decision of where to build its new small sports utility vehicle.
The German carmaker has requested workers in Wolfsburg to work under the Auto 5000 model, meaning workers will have to take a pay cut of between 20-40 percent.
One senior executive said, “Auto 5000 is the future of manufacturing at VW. The harsh truth is that employees at Wolfsburg will have to earn less money or they will lose their jobs.”
Unfortunately, this is the reality to thousands of Volkswagen employees in Wolfsburg.
Unless the workers in agree to take the pay cut, Volkswagen will take the necessary steps to ensure that production on their new sports utility vehicle takes place in Portugal, in an effort to cut production cost.
If the production of the new SUV takes place in Wolfsburg, it would only create one thousand jobs, leaving thousands of employees’ work status unresolved.
In order for Volkswagen to get rid of all unneeded employees, the company would have to buy out those employees’ contracts and recommend the others for retirement.
By drastically cutting employment, Volkswagen believe the profitability of the company will increase because the amount of employees would be back at a number where the company can actually make a profit.
In spite of Volkswagen’s circumstances with their employees, Volkswagen owner Mwia Matua, a third year Pre-med student from Chicago said, “I will continue to support Volkswagen regardless of their situation with employees. Volkswagen makes good cars.”
Stephen Cheetham, an analyst at Sanford C Bernstein, said the move to cut jobs “indicates a shift in the political landscape in Germany – helped by scandals which demonstrate the moral bankruptcy of the old consensus – to the point where issues that were taboo until recently are now being actively addressed.”
Earlier this summer, Volkswagen was involved in a scandal in which staff set up a global network of six front companies to get supply contracts, and that former staff sought kickbacks for work in India and Angola.
Currently, Volkswagen is struggling to sell cars profitably in the United States despite mass marketing campaigns and has also seen its earnings slump in China. Overall, the overhead cost of having thousands of useless employees and a series of scandals has had a lasting affect on the financial growth of Volkswagen in 2005.
contact alexander harris iii at Alexander_G_Harris @yahoo.com.