Volkswagen will cut up to 30,000 jobs globally as it attempts to recover from the biggest scandal in its history.
After months of intense talks, VW’s management team and unions agreed a package that aims to save €3.7 billion (£3.2 billion) per year.
In June the company was fined $15bn for cheating emissions tests and is also grappling with big shifts in the car industry.
Germany will bear the brunt of the cuts with 23,000 job losses. The company says it also aims to create 9,000 new jobs as it shifts to electric and self-drive technology.
Volkswagen chief executive, Matthias Mueller, said it was “the biggest modernisation programme in the history of the group's core brand”.
“The VW brand needs a real shake-up and that is exactly what the future pact has turned out to be,” he added.
The car giant is one of the world’s biggest employers, with 624,000 workers in 31 countries, meaning the cuts represent around 5 per cent of its total workforce.
VW’s brand chief, Herbert Deiss said: “All manufacturers must rebuild themselves because of the imminent changes for the industry. We need to brace for the storm.”
Volkswagen has been battling a crisis that erupted after it scammed emissions tests, meaning its cars were far more polluting than claimed and breached legal limits.
The company fitted its cars with so-called “default devices” - software that detected when cars were being tested in lab conditions and adjusted the car’s settings to make it more fuel efficient. The same model then emitted far more greenhouse gases when on the road.
The company has agreed to pay a record $15bn settlement with US authorities and owners of about half a million vehicles. Volkswagen may yet face further fines as customers in other countries demand compensation, though UK customers are set to receive nothing after the Government ruled the company acted legally.
US authorities have taken a different view. VW engineer James Liang faces up to five years in prison after pleading guilty this month to federal charges for his role in the scandal. The lawsuit opens the door for further criminal prosecutions in the coming months.
The VW brand, which accounts for almost half of the group’s sales, was struggling even before the emissions crisis tarnished its reputation. It has struggled with weak profitability, weighed down by burdensome labour contracts and a complex corporate structure.
The VW group has 12 brands from seven European countries: Volkswagen passenger cars, Audi, Seat, Skoda, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Volkswagen Commercial Vehicles, Scania and MAN.
