Volkswagen along with its strong labour unions have agreed to cut 30,000 jobs at the VW brand in exchange for avoiding any excess in Germany until 2025. The compromise could leave the carmaker's profitability lagging behind its competitors.
The new plan announced will lead to 3.7 billion euros in annual efficiency gains and will lift the VW brand's operating margin to 4 percent by 2020. Earlier the company had expected 2 percent this year.
The new found target will still be behind with some its rival European carmakers such as Renault and Peugeot Citroen which are targeting operating margin of 6 percent in 2021.
Volkswagen has been dousing the diesel gate scandal by paying hefty fines and settlements as well as fund the shift to electric and self-drive cars.
The company is trying to increase savings at its biggest business in Germany where the costs are high.
The leaders of the labour unions of Volkswagen said the management had agreed to avoid forced redundancies in Germany until 2025. This step will pave the way to cut 23,000 jobs via buyouts, early retirements and by reducing part-time workers.
North America, Brazil and Argentina will witness the job cuts said VW without confirming the actuals.
Labor union leaders have agreed to cuts in exchange for new job creation of nearly 9,000 in the area of electric cars mainly in the hometown of Germany.
VW will build electric cars at Zwickau and Wolfsburg factories. The electric motors will produced in Kasel, and the company will start battery cell production in Salzgitter.
The company added that it will manufacture battery packs for hybrid and electric cars at its plant in Braunschweig.