Volkswagen's Future Battery and Electric Motor Plants Are Sweetener for 30,000 Job Cuts

Volkswagen's  (VLKAY) agreement to reduce employment by 30,000 comes with a key sweetener for German unions and for the province of Lower Saxony, the automaker's 20% owner.

VW disclosed it will build its own battery and electric motor plants in Germany, supplying 3 million batteries a year by 2025, a major investment that underscores the seriousness of its assertion that a quarter of VW's vehicles will be electric. VW's shift toward electric and self-driving cars will create 9,000 jobs in its home market, according to a pledge by management.

Nevertheless, several analysts deemed the cuts too small. In the wake of VW's diesel emissions crisis, the company has put aside $19 billion to pay for fines, damages and repairs following the admission last year that it had cheated on regulations in the U.S.

"The deal may be the best the company could negotiate with labor but it's not a victory for either side," Erik Gordon, a business professor at the University of Michigan, told Reuters. "The cuts are too small to make VW cost competitive with Toyota and other global rivals."

I wouldn't count VW out of the race for global supremacy too quickly, however. Notwithstanding the talent it has lost -- and will lose -- once the investigation into the cheating scandal is complete VW will still employ a deep reservoir of young, capable and dedicated engineers and managers.

The future of personal mobility looks more and more like one that will be dominated by electricity and by artificial intelligence. No one knows how soon the technologies will be ready for prime time, though the imminent emergence of cars like General Motors's (GM)  Chevrolet Bolt EV in the U.S., which is to be sold as the Opel Ampera in Europe, will speak volumes about how a no-compromise electric car is accepted by mainstream consumers.

VW's $300 million investment in Israeli start-up Gett earlier this year ratified the company's seriousness in the area of ride-hailing. Over the weekend, VW also disclosed that it had spoken to Uber about a collaboration, though the talks foundered because the San Francisco ride-hailing leader wasn't interested in a partnership.

"They [Uber] saw us more in the role of a supplier. But we said: 'OK guys, this is a contest which we are happy to take on. We will remain in command,'" reported German newspaper Frankfurter Allgemeine Sonntagszeitung, which quoted Mattias Mueller, VW's CEO.

Uber's stance mirrors the one taken when it and Volvo agreed on a $300 million supply contract to use Volvo XC90 crossovers for self-driving testing in Pittsburgh.

Competition for superiority in mobility's latest technologies has a deadly selfish quality to it. Only the fittest will survive, the reason VW and its unions can agree to trim down to fighting weight.

Doron Levin is the host of "In the Driver Seat," broadcast on SiriusXM Insight 121, Saturday at noon, encore Sunday at 9 a.m.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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