BMW announces cuts to save 12bn until 2022

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After Audi, the car manufacturer BMW has now also announced an ‘austerity plan’. Instead of job cuts, however, the Munich-based company will focus on shlashing the employee profit-sharing plan. That way, twelve billion euros are to be saved by 2022.

The cost-cutting in the German automobile industry continues: Only one day after Audi, the car manufacturer BMW announced an agreement with the works council. In contrast to their competitor from Ingolstadt, the Munich company won’t make any far-reaching job cuts, but employee bonusses are reduced by almost 20 percent, as the company announced after a meeting with the works council. CEO Oliver Zipse said:

“Together with the works council, we have achieved a solution based on solidarity. This allows us to dispense with drastic measures that others are currently taking in order to reduce their costs.”

The Chairman of the General Works Council, Manfred Schoch, stressed that it had been possible to secure the “unique profit-sharing” in the long term. However, since the dividend will in future be excluded from the calculation as one of several reference figures, the premium will decrease overall. According to BMW, according to the new formula, a typical assembly line worker in the ERA 5 pay scale would not have received 9100 euros in 2019, but 7600 euros. In addition, employees who voluntarily work 40 instead of 35 hours will suffer financial losses. Their Christmas bonus and profit-sharing are no longer calculated on the basis of their 40-hour income, but on the basis of a normal 35-hour week.

Approximately 90,000 employees affected

The cuts are part of an austerity package that goes by the name of ‘Next’, with which BMW aims to cut costs by more than twelve billion euros by 2022 and stabilise profitability in order to stem investment in new electric cars. The austerity measures also include a reduction in the number of temporary workers and a reduction in administrative staff. The regulations will apply from the 2020 financial year and affect around 90,000 employees.

Job cuts at Audi: “Severe blow for the region”

At Audi, where up to 10,000 jobs are to be cut until 2025, the crisis in the automotive industry is felt much more strongly. “This reduction of several thousand jobs in Ingolstadt is a severe blow for the region,” said Bavarian Economics Minister Hubert Aiwanger. The head of the Ingolstadt Employment Agency, Johannes Kolb, stressed that he did not expect any major changes in unemployment numbers in the short term. If, however, “it is not possible to manage the structural change and the changed demands on the employees and their qualifications”, the threat of a significant increase looms in the medium and long term. According to Kolb, the unemployment rate in Ingolstadt was 1.9 percent in October.

There is also concern in the surrounding area about the announced job cuts. In Schweinfurt, more than 3000 employees of automotive suppliers protested against the announced cuts. The IG Metall union had organized a rally under the motto “Security in uncertain times”. Schweinfurt is a hub of the automotive supplier industry in the region.

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