VW Workforce Starts to Feel Pinch From Diesel-Emissions Scandal

The Long Rise and Rapid Fall of Volkswagen
  • Carmaker cuts one extra shift at Salzgitter engine factory
  • VW to give efficiency program "turbo" boost, labor leader says

Volkswagen AG’s 600,000-person workforce is starting to feel the impact of the diesel-emissions scandal as the carmaker cuts spending in anticipation of fines, recalls and a drop in U.S. sales.

Volkswagen slowed production at one of its biggest engine factories and froze hiring in Germany at its unit that makes car loans, the Wolfsburg, Germany-based company said Thursday. More measures to rein in spending are expected as Volkswagen seeks to weather the crisis by giving its efficiency program a “turbo” boost in the billions of euros without cutting jobs, Bernd Osterloh, VW’s labor chief, told workers in a letter on Sept. 24.

VW’s labor chief Bernd Osterloh
VW’s labor chief Bernd Osterloh
Photographer: Krisztian Bocsi/Bloomberg

The automaker is facing a significant financial impact, including at least 6.5 billion euros ($7.25 billion) it already set aside for repairs and recalls and a U.S. fine that may reach $7.4 billion, according to analysts from Sanford C. Bernstein Ltd. How the company will react was among the topics on the table when the board’s leadership panel met late into the night on Wednesday with Chief Executive Officer Matthias Mueller.

“Volkswagen has a broad range of options should they need to boost liquidity,” said Frank Biller, a Stuttgart, Germany-based analyst with LBBW. The company could try to step up the VW brand’s existing cost-savings program, which had originally aimed to boost earnings by 5 billion euros by 2017, he said. “Then there’s a catalog of measures that could follow.”

These range from shrinking ad and sponsoring budgets to reducing bonus payments, cutting the dividend or selling assets, Biller said. Volkswagen had 21.5 billion euros in net liquidity at the end of June and since then sold shares in former partner Suzuki Motor Corp. for about 3.4 billion euros.

U.S. Sales

How much Volkswagen’s emissions cheating will weigh on deliveries will begin to become clear when the carmaker releases its U.S. figures for September on Thursday. Though the scandal didn’t emerge until the month was more than half over, it will probably have an effect because most car sales come at the end of the month.

In Salzgitter, Germany, where some 7,000 workers turn out about 1.58 million engines a year for everything from Bugatti supercars to the mass-market VW brand, Volkswagen dropped one extra shift a week because of the diesel scandal, spokesman Christoph Adomat said. At the financial services car-loan unit, spokesman Stefan Voges said Volkswagen froze hiring in Germany through the end of the year and told 29 temporary workers they won’t have their contracts extended.

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