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Coronavirus: VW and Daimler to put tens of thousands onto reduced hours as plants close

Jill Petzinger
Jill Petzinger, Germany Correspondent, Yahoo Finance UK
The Volkswagen factory in Wolfsburg, Germany. (Stuart Franklin/Getty Images)

Germany’s car giants are preparing to put tens of thousands of employees onto part-time hours after shutting down their European plants last week.

Mercedes-Benz owner Daimler (DAI.DE) will send thousands of staff on forced leave from 6 April for several weeks. A spokesperson told Reuters (link in German) that the exact number of staff who will be put onto ‘Kurzarbeit’ — ‘short-time work’ — has not been decided, but it is likely that a large part of the company’s 170,000 workforce in Germany will be affected.

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Volkswagen (VOW3.DE) in Germany also plans to stand-down some 80,000 workers for lack of work. "The current spread of the coronavirus means that Volkswagen has to adjust the production programme," said a VW spokesman this week, noting that a drop in sales coupled with delivery bottlenecks meant downtime for production.

VW has applied to put its staff on reduced-hours contracts at some plants until 3 April. Audi and Porsche, who belong to the VW Group, are also planning similar measures.  

‘Kurzarbeit’ was introduced by the German government during the financial crisis in 2008 with the aim of avoiding mass layoffs. The government pays 60% of a worker’s salary to the company – to pay the person while they are temporarily laid off. If the worker is forced onto part-time hours, they get paid for those as normal by the company, and the government subsidises for the shortfall.

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As well as securing people’s livelihoods, it means that companies don’t lose skilled staff that they would need again once the situation improves — a lack of skilled workers is a perennial headache for German businesses.

As part of its multibillion-euro package of measures to safeguard jobs and avoid bankruptcies during the coronavirus pandemic, the German government last week announced that it would relax its rules on ‘Kurzarbeit’ to allow more firms to take advantage of it.