Volkswagen furloughs 100% of its workforce at the Tennessee assembly plant

As the Coronavirus pandemic continues to wreak havoc on the global auto industry, disrupting production and slashing demand, Volkswagen AG (ETR:VOW3) announced on Thursday that it plans on placing 1500 employees at its Tennessee assembly plant on furlough. The U.S-based employees, the company added, will be furloughed on April 11^th.

According to the German automaker, both its production and maintenance workers in the Tennessee facility, are likely to be affected. The company, however, expressed confidence that the furlough will be temporary and is unlikely to remain in place for more than 4 weeks.

VW Employees To Get Health Benefits And Bonuses During The Furlough Period

Volkswagen reiterated in its statement on Thursday that the ongoing health crisis has raised unprecedented economic challenges for the company. The temporary furlough is aimed at maintaining the company’s financial stature for quick recovery once the pandemic subsides which will benefit the employees in the long run.

The automaker also accentuated that its production contractors and employees have been receiving full salaries and benefits since the shutdown started on March 21^st. In the furlough period, the company added, its employees will still be eligible for the scheduled quarterly and monthly bonuses as well as the healthcare benefits. The salaries, however, will be lost in this period.

The furloughed employees (around 1,500 in total) of VW’s maintenance and production teams mark its entire workforce in Chattanooga, Tennessee facility.  

Volkswagen encouraged the furloughed employees to claim for unemployment benefits during this period. The CARES Act will also offer an additional $600/week to these workers. CARES is the U.S government’s $2 trillion emergency financial support bill that Congress approved in late March.

Auto Sales Declined Sharply In The U.S Due To Coronavirus Restrictions

The government-imposed restrictions that have shut down businesses and restricted consumers to their homes have resulted in a sharp decline in sales in the world’s 2^nd largest auto market, the United States.

Several of the top automakers from across the globe including Fiat Chrysler, Nissan, Toyota, Honda, have also resorted to similar cost-cutting strategies to cushion the economic blow from COVID-19.

At £107.50, Volkswagen is currently more than 30% down in the stock market in 2020 so far. Its performance in 2019, on the contrary, was fairly upbeat with an annual gain of around 25%.

At the time of writing, VW has a market cap of £57 billion and a price to earnings ratio of 4.60.