VW to Cut Jobs for Profitability, Recovery From ‘Dieselgate’ Scandal

Volkswagen and its labor unions have agreed on a plan involving 30,000 job cuts by 2020 aimed at boosting profitability and helping the carmaker recover from the so-called “dieselgate” emissions cheating scandal.

The agreement, reached after months of difficult negotiations, will lead to annual savings of $3.9 billion. Two-thirds of the job cuts are expected at VW plants in Germany, and the others in North America and Brazil.

Labor leaders agreed to the cuts in exchange for a management pledge to create some 9,000 new jobs through investments in electric and self-drive cars, mainly in factories in Germany

VW managers have agreed to build an electric sports utility vehicle at its main plant in Wolfsburg and a smaller electric vehicle, known as the I.D., in Zwickau, sources close to the labor-management deal said. Volkswagen has declined to comment.

VW group was plunged into the biggest crisis in its history and the first loss in more than 20 years last year after revelation that 11 million of its vehicles had been fitted with devices that switched anti-pollution controls on during tests, but shut off the devices during normal driving.

The carmaker, which employs about 600,000 people globally, has created a fund of some $19 billion to cover the fallout of the scandal, but experts believe the final bill for the buy-backs, fixes and legal costs will be much higher.