VW says up to 20,000 jobs could be cut by 2009, says profit surged in 2005

Friday, February 10th 2006, 8:31 am
By: News On 6

FRANKFURT, Germany (AP) _ Volkswagen AG said Friday that up to 20,000 jobs could be cut in the next three years as part of a restructuring plan to reduce costs and make Europe's biggest automaker more profitable.

The announcement came as the company reported a preliminary 2005 net profit of 1.1 billion euros ($1.3 billion), up 61 percent from 697 million euros the previous year. That beat estimates of 834 million euros ($998 million).

Shares of Volkswagen rose more than 8.2 percent to 54.79 euros ($65.59) in Frankfurt trading.

``Up to 20,000 direct and indirect employees within the Volkswagen Passenger Car brand could be affected by this restructuring program,'' the company said in a statement after a meeting of its board.

Volkswagen, which employs more than 340,000 workers worldwide, also said it would look at ``adjusting'' capacity at its production plants. It did not give a breakdown on how many of the potential job cuts would involve its own employees versus how many involve people indirectly employed in its car business.

Chief Executive Bernd Pischetsrieder said the program was an effort to improve efficiency.

``This number is not a goal for reducing personnel,'' he told reporters. ``We have a collective agreement and it is not our intention to quit that agreement.''

Volkswagen began an ambitious cost-cutting program last year. In September, it said would build its new sport utility vehicle in Germany after labor groups agreed to reduce production costs to keep it from being built abroad.

It also has said it would decrease its work force of 103,000 in western Germany, offering early retirement packages and severance in the hope that employees would leave voluntarily.

The company, giving preliminary figures ahead of its scheduled earnings results, said sales for the year rose 7 percent 95.27 billion euros ($1.14 billion) in 2005, compared with 88.96 billion euros in 2004. Operating profit increased to 2.79 billion euros ($3.3 billion) from 1.64 billion euros the previous year.

Volkswagen said the comparison figures were adjusted because of amendments to International Accounting Standards. Full figures, including fourth quarter results, are scheduled to be released Tuesday.

Besides announcing the preliminary figures, the company also said it planned a 2 billion euro ($2.4 billion) bond buyback program.