Why is VW Cutting Jobs?
14 months after the Volkswagen (VW) emissions scandal broke, VW struggled with lagging profits compared to competitors and lower productivity.
For example, last year, with 610,000 workers globally, VW built slightly fewer vehicles than Toyota which has 350,000 staff.
VW is saddled with lots of baggage, like unprofitable vehicles in its 340-model range and potential liabilities of fines from its emissions cheating scandal.
VW will cut jobs and save costs to raise its operating margin from a dismal 2%.
What deal wiLL German unions get after collective bargaining?
German unions successfully negotiated for VW to avoid forced redundancies in Germany until 2025.
Yet, 23,000 jobs will be cut via other “more palatable” methods like buyouts, early retirements and reducing part-time staff.
Jobs will also be cut in North America, Brazil and Argentina, VW said, without being more specific.
Despite the job cuts, VW management has pledged to create 9,000 new jobs in battery production and mobility services at factories in Germany, to shift toward electric and self-driving cars.
What can Singapore learn from this?
Firstly, jobs had to be cut because the whole company was relatively unproductive, and less able to cut costs to retain staff.
If staff costs make up a huge chunk of operating costs, falling revenues mean that management is more likely to arrow staff costs as the first few costs to cut.
As it our wages are relatively higher than working people in neighbouring countries, does the quality and quantity of work by Singaporean workers justify our wages?
Secondly, even with the presence of unions, jobs still had to be cut. Unions cannot protect every single job.
The sad thing is that those who will be let go may not be given chances to train up for the new 9000 jobs, or even capable of learning those skills in a short period of time.
Even if they wanted to, the new jobs will be sited in Germany, not in the other countries where workers are cut.
Thirdly, even with the job cuts, costs may rise elsewhere. When an organisation becomes too big, it is harder to evolve and adapt to change.
Teams may be too big and staff working in silos, unable and unwilling to transform their roles to cross-functional ones, preferring to stay in a deep skill that the world finds redundant.
The world is changing, will we have the mindset of a dinosaur or a cockroach?