Volkswagen Group has announced a short-time work period for 80,000 employees in Germany, after the Covid-19 coronavirus pandemic forced the automaker to temporarily cease operations of its factories across Europe. A company spokesperson told Automotive News Europe that the reduced hours would be introduced in three plants – Lower Saxony, Hessen, and Saxony until April 3.

According to German short-time working rules, the state will pay a portion of the reduced salaries for workers. Volkswagen will pay for the actual working time, while the Federal Employment Agency contributes an allowance of 60% of the missing net wage. The maximum duration of state-funded short-time working allowances is six months, but can be extended by ministerial decree by up to 12 months, depending on market conditions. A 24-month extension can be enforced, but only under exceptional circumstances.

The programme, which was introduced during the 2008-2009 financial crisis, was crucial in preserving the country’s workforce. It helped prevent employee dismissals while providing companies cost and productivity advantages by adjusting working time to the market situation and volatile demand. It also allowed companies to swiftly resume operations when markets rebound.

Other brand under its wing, such as Audi, Porsche, and its trucks division MAN, have also applied with the country’s works council to implement short-time working in a bid to save costs.

Volkswagen supervisory board member, Bernd Althusmann said businesses of all scales face a disruption that “goes far beyond” the 2008 financial crisis. Althusmann, who is also the economy minister in Lower Saxony (where VW’s global headquarters is located), expects the economic fallout from the coronavirus outbreak will be felt for a long time.

Besides that, the auto giant will provide support for its German dealership network with additional liquidity. It even offered to defer repayment dates, extend credit allowances and make interest rate payments for favourable for its dealers.

While most of VW’s factories in Russia and South America remain shut, the company is slowly ramping up output in China after the government announced that it would lift the lockdown. In the Hubei province, there’s been no new Covid-19 cases for five consecutive days, which means businesses in Wuhan can resume operations soon, albeit based on risk assessment. The easing of restriction will be extended to Wuhan on April 8.

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