BMW Bayerische Motoren Werke AG

By William Boston 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 27, 2019).

BERLIN -- Luxury-car maker Audi AG said it would eliminate 9,500 jobs over the next five years as part of a restructuring aimed at bolstering profit in a slowing global auto market.

The overhaul is expected to reap savings of roughly EUR6 billion ($6.6 billion) through 2029, a large part intended to finance Audi's move away from production of conventional cars and toward electric vehicles. The plan doesn't entail any layoffs through 2029, with the workforce reduction to be achieved through employee turnover.

Major auto makers are struggling with a slowdown in the global economy and rising development costs to produce electric cars to meet stricter guidelines on greenhouse-gas emissions.

Audi, which is based in Ingolstadt, Germany, is also losing ground in the premium-car market as new competitors make a bid for the profits to be had from selling high-priced luxury vehicles.

In the first nine months of this year, Audi's car production fell 6% from a year earlier to 1.4 million vehicles as a result of declining global demand. Sales fell to EUR41.3 billion from EUR44.3 billion, while after-tax profit rose to EUR2.8 billion from EUR2.5 billion.

Audi was long reluctant to go electric, and instead was instrumental to developing illegal software that allowed its parent, Volkswagen AG, to rig millions of diesel-powered cars to cheat emissions testing for a decade. The deception was uncovered by researchers, and in 2015 U.S. authorities charged Volkswagen and Audi for committing fraud and violating U.S. environmental laws. In 2016, Volkswagen pleaded guilty and has faced fines, penalties, compensation costs and legal fees of more than $30 billion.

The affair tainted Audi's image and it lost ground to its main rivals, BMW AG and Daimler AG's Mercedes-Benz. Audi's former chief executive, Rupert Stadler, was arrested and detained for months on charges stemming from the diesel scandal.

Audi has been hit by the sluggish global economy, especially in China, where the company was once the best-selling luxury brand before losing market share to its German rivals, as well as U.S. brands Cadillac and Lincoln.

"In times of upheaval, we are making Audi more agile and more efficient. This will increase productivity and sustainably strengthen the competitiveness of our German plants, " Bram Schot, the company's interim CEO, said in a statement Tuesday.

Mr. Schot is set to be replaced in April by Markus Duesmann, who was poached from BMW by Volkswagen CEO Herbert Diess, who also came over from BMW.

Earlier this year, Audi launched its first all-electric vehicle, a sporty SUV that is positioned to challenge the Tesla Model 3 and the Mercedes EQC for dominance in the market for premium electric sport utility vehicles.

Audi's restructuring plan comes on the heels of similar announcements by BMW, Daimler and major automotive suppliers such as Continental AG.

Struggling under the burden of the transition to electric in a slowing global economy, German automotive companies have announced tens of thousands of job cuts and a handful of plant closures in Europe, China, and the U.S.

As it eliminates some jobs, Audi plans to create 2,000 new positions in development and production of electric cars and digitalization of its factories. The company, which had more than 91,600 employees in 2018, said it would give priority to retraining existing staff to fill the spots, but also look make outside hires.

The details of the restructuring plan were thrashed out in months of negotiations with labor representatives. Under German law, labor has half the seats on Audi's nonexecutive supervisory board, forcing the company to offer incentives to gain approval for job cutting.

In addition to guaranteeing that there would be no layoffs before 2029, Audi management also agreed to increase its contribution to the company's pension plan by up to EUR50 million annually beginning in 2021.

Write to William Boston at william.boston@wsj.com

(END) Dow Jones Newswires

November 27, 2019 02:47 ET (07:47 GMT)

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