Audi to cut 9500 German jobs in switch to EVs

29th November 2019
Resources Rising Stars

Frankfurt | Audi plans to eliminate roughly 15 per cent of its German workforce to lift earnings by $US6.6 billion ($9.7 billion) as Volkswagen's largest profit-maker pushes ahead with a restructuring plan to help it adapt to the costly transition to electric cars (reports The Washinghton Post).

The turnaround is aimed at regaining ground lost to luxury-car leaders Mercedes-Benz and BMW and counter pressure from Tesla. Volkswagen has been scrambling to revive Audi's fortunes after turmoil sparked by the aftermath of the 2015 diesel-cheating scandal.

By 2025, Audi plans to cut as many as 9500 jobs in Germany and streamline operations at its two main factories in its home country. The positions will be reduced through attrition and voluntary measures including early retirement, Audi said in a statement on late on Tuesday (AEDT) after reaching an agreement with employee representatives.

The approximately 50,000 remaining Audi employees in Germany will have job guarantees until 2029, and Audi will create 2000 new jobs to strengthen its engineering muscle for electric cars and digital offerings.

"We are now tackling structural issues in order to prepare Audi for the challenges ahead," Audi chief executive Bram Schot said in the statement. "In times of upheaval, we are making Audi more agile and more efficient."

Talks with labour unions on the job cuts had dragged on for months, and Volkswagen appointed former BMW executive Markus Duesmann, 50, as the brand's new chief starting in April to advance the process. He will replace Schot, who succeeded Rupert Stadler after his arrest in connection with the diesel crisis.

"VW group has embarked on a potentially significant reorganisation of its activities," Timm Schulze-Melander, Redburn industry specialist, said in a note. "Things may not move in a straight line, but progress is expected by investors given the significant challenges in 2021 in Europe."

Complying with tighter European emissions rules requires significant investment, while trade wars and uncertainty related to Brexit fallout adds to the complexity of managing the disruptive technology shift.

Audi has been wrestling with stricter emission-test procedures that took effect in Europe last year and led to significant production bottlenecks that bogged down deliveries.

The world's third-largest luxury-car brand has been pushing for a fresh start with a review of its product range, which led to the decision to halt the TT coupe. The former design icon will be replaced with a battery-powered model.

To revive momentum, Audi will launch five fully-electric and seven plug-in hybrid models within two years and broaden the line-up to more than 30 electrified cars by 2025. But the transition will be costly after higher spending on electric models like the E-Tron contributed to returns last year dropping to 6 per cent from 7.8 per cent.

Audi produces the E-Tron at its factory in Brussels. It will add electric-car production at its two main German factories in Ingolstadt and Neckarsulm as well as part of the labour pact to ensure sufficient output.

Audi targets slightly higher deliveries and revenue this year, and an operating profit margin between 7 per cent and 8.5 per cent. The cost cuts are aimed it lifting margins back to a range of 9 per cent to 11 per cent.

Audi didn't specify whether it can reach the goal next year as planned.


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