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Volkswagen Slashing Up to 7,000 Jobs to Boost R&D by $9 Billion

Volkswagen (VLKPF) is to cut up to 7,000 jobs by 2023 so that it can increasingly focus on electric vehicles and production automation.

Handelsblatt reports the move—which will primarily hit administration workers in Germany—will free up €8 billion ($9 billion) in cash that can be redirected into research and development.

“We have already achieved a great deal with the pact for the future: but there is still much more to do if we are to manage the challenges facing us beyond 2020 as well,” COO Ralf Brandstätter said in a statement. “We will significantly step up the pace of our transformation so as to make Volkswagen fit for the electric and digital era. Volkswagen is to become more efficient and agile and a more attractive and modern employer, especially in administration.”

The German car giant said about 11,000 of its employees will be eligible for retirement in the coming years, and it expects to achieve the bulk of the cuts through attrition. VW has around 110,000 employees in Germany, and protections that prevent redundancies are in place until 2025. The company works council has warned VW’s management against treating administration and production workers differently in offering the possibility of semi-retirement.

Volkswagen’s announcement is part of a wider prioritization of electric vehicle production. On Tuesday the firm revealed ambitious plans to produce 22 million electric cars over the next decade, an increase of almost 50% from its previous goal. That includes a target of 70 electric models across its brands—including Audi, Porsche, and Skoda—over the next decade, a substantial increase from the previous target of 50 models.

The automaker is also under pressure to cut emissions across its brands as new EU regulations set increasingly ambitious targets. Volkswagen estimated in December it would have to sell 600,000 more electric vehicles per year to meet the new EU plans. To put that into perspective: the Volkswagen Group sold a record 10.8 million cars last year, but just 40,000 of these were electric.

Meanwhile, Volkswagen will decide in the coming days whether to take its Traton trucks division public, Reuters reports. The board had unanimously supported the IPO of the spinoff, which includes MAN, Scania and Volkswagen trucks, but the volatile market is a concern. “We need to assess our plan versus the marketplace. The current environment is quite challenging,” Volkswagen CFO Frank Witter said Tuesday.