German carmaker Volkswagen has unveiled plans to cut tens of thousands jobs worldwide. It is part of a restructuring plan to boost profitability and fund a shift to electric and self-driving cars following the emissions scandal.
About 23,000 jobs are to go in Germany, the company announced Friday.
According to Volkswagen Chief Executive Matthias Mueller, it will be “the biggest modernization program in the history of the group’s core brand.”
“The VW brand needs a real shake-up and that is exactly what the future pact has turned out to be,” Mueller said.
The job cuts will help make €3.7 billion ($3.92 billion) in annual savings by 2020. The brand’s operating margin is expected to increase from the current two percent to four percent.
Volkswagen also foresees a 25 percent improvement in productivity at its German plants.
The job cuts have been agreed with labor leaders in exchange for a management pledge to create new jobs and invest in electric cars.
Along with cutting traditional jobs, the VW brand will reportedly create 9,000 new jobs through investment in electric car technology. The company will need new employees with skills to run digital businesses and make electric cars.
Volkswagen will build electric motors at its Kassel engine plant and start battery cell production at the Salzgitter plant.
Last month Volkswagen said it might have to eliminate as many as 25,000 positions from its global workforce of 624,000 in the coming years. VW Group Chief Human Resources Officer Karlheinz Blessing said the company “will need fewer employees in the long-term.”
The global scandal over VW cheating emission tests is weighing on the company.
Europe’s largest automaker is trying to cut costs after reaching a deal with US authorities to pay over $15 billion in fines.
READ MORE: Volkswagen expects to lose 25,000 jobs
As part of the deal, the company has agreed to buy back vehicles from American customers and invest in cleaner technologies. It will also pay up to $2.7 billion over three years to enable the US government to replace old buses.
The German automaker is facing another €8.2 billion in damage claims from investors over their losses following the emissions scandal.
Last year Volkswagen lost $6.6 billion over the ‘Dieselgate’ scandal with nearly 11 million cars affected worldwide. The company has already put aside $25 billion as part of a global recall program.