Volkswagen announced plans Nov. 17 to cut 30,000 from its workforce over the coming years as a result in part of the diesel emissions scandal as well as a switch to electric cars.
For the most part, U.S. workers will be spared. The automaker expects the reductions to come from natural turnover and partial early retirement with 23,000 to come from the German workforce and most of the rest coming from Argentina, Brazil and North America, the company said.
Most of the cuts will come from plants where components for internal combustion engine cars are produced. The company had previously warned that the switch to electric cars will cost jobs, as electric cars tend to have many fewer parts than combustion engines, and so don't require as many workers to assemble and install in cars.
The day after the cuts were announced, the automaker's U.S. office put out a press release lauding a $30,000 donation to the Los Angeles Lakers Youth Foundation. While charitable donations almost always generate positive press, the timing on this one coming on the heels of the layoff announcement seems ill.
Another press release from Nov. 15, just two days before the cuts were announced, talks up the way Volkswagen Group of America and its dealers support nearly 120,000 U.S. jobs and contribute nearly $25 billion to the U.S. economy. That’s according to a study conducted by Ernst & Young and commissioned by the automaker.
The study finds that employees supported by VWGoA’s U.S. operations earned a total of more than $7.1 billion in compensation, and generated $24.8 billion of U.S. economic gross output. VWGoA’s U.S. operations, comprising more than 900 Audi and Volkswagen dealerships in all 50 states, and 56 corporate-operated facilities in 15 states, contributed $2.4 billion of federal, state, and local taxes in 2015.
It doesn’t take a genius to figure out that VW is hoping this glowing report of how VW contributes to the economy will help distract from the seemingly never-ending “dieselgate” scandal, wherein the automaker installed illegal devices to make its diesel-powered passenger cars perform to satisfy the Environmental Protection Agency’s emissions test. In reality, the cars were emitting beaucoup pollution.
The automaker’s U.S. sales have continued to struggle, in part because it has not been able to sell diesel vehicles this year. Sales are down 12.5% through September in contrast to industry sales, which are essentially flat from a year ago.
VW is spending more money on incentives to sell its gasoline-powered vehicles as the diesel problem has impacted the desirability of all of its vehicles. The automaker is hoping consumers will elect to trade in their faulty vehicles for new VWs rather than take the buyback money and run.
Time will tell if this strategy and the other positive PR efforts pay off. November sales will be reported at the end of next week and there’s no doubt that VW is holding its breath in anticipation.