Volkswagen ready to cut 15,000 employees

Volkswagen could proceed with up to 4 billion euros in provisions for capacity cuts as early as the fourth quarter and plans 15,000 cuts. Jefferies analysts said in a note after traveling with company executives to North America.

Volkswagen said in early September that it was considering the closure of some factories in Germany for the first time in its history, to reduce costs and be competitive with Asian rival companies.

“The logic of downsizing VW’s brand is not new, but management’s sense of urgency and determination to address excess capacity and spending patterns is,” Jefferies analysts wrote in the note.

“Three days of traveling to North America with management convinced us that there is no plan B that excludes capacity reduction,” they added, noting that the company could decide to set aside 3 to 4 billion euros in the fourth quarter. Jefferies did not specify the purpose of the trip. Volkswagen did not comment on the report. Last week Volkswagen terminated a workplace safety program for six of its German plants, clashing with unions who have promised fierce resistance against any kind of cuts.

“Unions should feel pressured to reach new agreements as VW seeks to impose new layoffs. There is a risk of plant shutdowns, but unions can only strike over wages, not plant closures or layoffs if the latter are not covered by contracts,” Jefferies wrote.

Jefferies said the costs could range between €2.5 billion and €3 billion, and up to €4 billion assuming separation costs equivalent to two annual salaries per employee and “including other closure costs” that it did not specify.