German auto major, Volkswagen Group, is offering early retirement to all its 2,300 workers across its two factories in the country, sources said, as the firm looks to overcome growth obstacles in India-the world’s third-largest car market. The Volkswagen Group had begun a broader restructuring in India, where it is fighting the country’s biggest import tax demand yet of $1.4 billion for allegedly evading levies. It has denied the claims.
While the group sells its Volkswagen, Skoda, AUDI, Porsche, Lamborghini and Bentley brands in India, it has a market share of merely 2% despite more than two decades of operations. Skoda chief Klaus Zellmer has spoken about the requirement for growth in India especially since this brand is no longer big in China and has exited Russia.
Factories are operating below capacity.
Both of the Volkswagen factories in India operate below their installed production capacities. The group has announced an early retirement scheme for its blue-collar employees to “rationalise manpower and align it with present needs,” one of the two sources told Reuters. The source added that the company wanted to make sure that it would still be able to pay competitive wages and that the plants would keep on operating. Both sources asked not to be named because of the sensitivity of the matter.
Skoda Auto Volkswagen, which has been heading the group’s India strategy since 2018 and seeks a local partner as it looks to finalise the next phase of investment in the country, said the early retirement scheme is on a voluntary basis and was promoted upon request by worker unions. Meanwhile, its restructuring programme-the company said in a statement-is aimed at strengthening its business, “reaffirming our long-term commitment to India.”
The scheme gives staff 75 days of pay for every year of service or every year left until retirement – whichever is smaller, the people said, adding that those signing up within five to 10 days get an additional payment. Both factories are located in India’s western Maharashtra state, where the company makes cars including the Skoda Kushaq SUV, Volkswagen Virtus sedan and the Audi Q3 and Q5 for sale in India and export to markets such as Mexico and South Africa.
