Daily Management Review

VW will shorten work shifts of 10 000 employees


German automaker Volkswagen will shorten working time of 10 thousand employees at the company's plant in Wolfsburg, reports Reuters referring to a source close to the company.

The decision was made because of problems with suppliers who do not adhere to obligations on delivery times. In particular, according to Volkswagen, ES Automobilguss stopped shipments of cast iron parts for gearboxes.

A representative of ES Automobilguss in a letter said that the company is currently in legal disputes with Volkswagen, so it is necessary to maintain confidentiality in this matter.

The carmaker plans to curtail operating shifts in its Wolfsburg factory, which employs 50 thousand people. The problems with Volkswagen’s suppliers came at a bad time, as the company is still trying to compensate for the losses incurred due to the diesel scandal in the United States.

The German automaker is trying to get lower prices from its suppliers to make up the Dieselgate losses, because of which Volkswagen was forced to pay billions of dollars in fines.

Earlier, the automaker from Wolfsburg reduced profit in II quarter of this year to 1.2 billion euro ($ 1.33 billion), while this figure was at 2.7 billion euro in the same period in 2015.

At the same time, sales of Volkswagen cars for the quarter increased by 5.6% yoy to 2.633 million.

Revenue of Volkswagen Group for the II quarter of 2016 was 56.9 billion euros, 1.7% lower than in the same period last year.

Operating profit, as reported in the preliminary release of July 20, increased by 20% to EUR 4.4 billion. This figure has been reduced by half because of a EUR 2.5 billion fine, which the company has to pay after the scandal with violation of environmental regulations.

Growth in operating profit was offset by sales of Czech Skoda, Spanish SEAT, Italian Porsche and trucks, while sales of Audi and Bentley brands showed a decrease. 

Volkswagen Group’s Chief Financial Officer Frank Witter said the final quarterly data indicate that profitability of the company remains at a high level. However, it is necessary to continue to work hard to make up for the Dieselgate losses.

Volkswagen’s sales for the first six months of 2016 increased by 1.5% to 5.1 million vehicles. Meanwhile, Toyota, which has been a leader in sales in 2015, managed to realize only 4.99 million cars, and American General Motors sold 4.76 million vehicles worldwide.

In September 2015, the US Environmental Protection Agency (EPA) brought charges against Volkswagen to use special programs. The latter switched on limitation of harmful emissions in cars’ diesel engines during the vehicles’ testing. The indicators were undercounted by 40 times. The sensors were not working in normal mode.

This Volkswagen practice, according to the EPA, infringed two points of the US legislation on clean air. In the period from 2009 to 2015, the company sold about 475 thousand vehicles with the fraudulent diesel engines.

The Dieselgate affected not only Volkswagen, but also the company's major suppliers - Continental and ThyssenKrupp. In addition, other European automakers also found themselves under attack.

source: reuters.com