REINVENTING JOBS. Environment and Automation ( Industry 4.0 ) are driving a great disruption of the jobs market ? The case of Volkswagen

Written by Corrado Clini, former italian minister of environment

Volkswagen and Unions agreed to cut 30,000 jobs over the next three years in the framework of a  wide-ranging restructuring, aimed at

  ü dealing with the aftermath of the “dieselgate”, rejuvenating the  brand switching  from diesel to electric and self-driving cars;

  ü reducing costs and improving productivity.

The main drivers of the VW plan are Environment and Industrial Automation.

The aftermath of dieselgate

According to the  “Air quality in Europe — 2016. Report of the European Environment Agency” in 2013 the premature deaths attributable to particulates (PM), nitrogen oxide (NOX)  and ozone (O3) , amounted to 520.000 in the EU.

The Report underlines the role of the emissions of NOX  from the diesel cars :  “Diesel vehicles accounted for about 52 % of new cars sold in the EU in 2014 (EEA, 2016e)…. NOX emissions from diesel cars are considerably higher than intended in the Euro 5 and Euro 6 regulations for diesel vehicles affects  ambient air concentrations of O3, PM10 and PM2.5, for which NOX is a precursor”.

The Report shows the huge gap between the NOX standards and the “real” emissions

Air pollution and urban congestion are the driving forces of the technology transformation in the automotive industry and mobility services

As a consequence of dieselgate, despite 25 years of championing the diesel engine as the touchstone of the fuel economy and the environmental protection, the EU had to acknowledge the relevant role of diesel cars in the urban pollution

Today, just a few months behind dieselgate, the ban of diesel cars is  a target to reduce the urban pollution (from India to China, from Italy to USA) .

This is the “environmental context” of the VW plan.

VW is shifting resources toward the production in Germany of electric and hybrid cars, battery packs, and internet based mobility services  such as car-sharing and ride-sharing, with the pledge to create 9.000 new jobs. The company plans to introduce almost 30 electric cars by 2025.

VW is the last big carmaker to move toward hybrid and electric cars, slower than the main competitors in the global market (Toyota, General Motors, Nissan, Hyundai), as well as the “new companies” Chinese  BYD (“Build Your Dreams”) and TESLA.

Other European carmakers are also entering in the plug-in EVS “race” : BMW, Mercedes, Land Rover and Jaguar (JLR ) of the Indian  TATA group.

Last November JLR announced the   plan to build electric vehicles (EVs) in the UK and to create 10.000 new jobs, asking for government investment in new infrastructure.

George Clark, the UK business secretary said the British Government “couldn’t be more aligned. The development of electric cars would be one of the big features of the world, and of Britain’s industrial policy”.

The shift from diesel and fossil fuels engines to plug-in EVS, is driving a radical change in the manufacturing process as well as in the features of work and employment.

The 9.000 new employees   in VW, or the 10.000 in JLR, will do a job quite different from the “traditional” car manufacturing.

This means that job creation  is subject to the technology innovation  , while  unemployment will be the predictable impact of  the failure to change the car manufacturing  process.

Reducing costs and improving productivity in the framework of Industry 4.0 Strategy

VW plans to bring annual savings of € 3.7bn   by 2020, as well as  to increase the brand's profit margin from 2% to 4%  improving  productivity  by 25%.

May be the cuts are to small to make VW competitive with the global rivals.

In 2015 VW, with 610,000 workers,   built  about the same  vehicles than Toyota which has 350,000 staff.

After the  jobs cut and the new jobs, the VW employees  will  be 590.000, 70% more than Toyota.

The challenging task is to improve the productivity changing the technology and the manufacturing process, as well as preserving jobs. 

Today automation, robotics and artificial intelligence are the “infrastructure” of technology innovation and high productivity, following the German Government's Industry 4.0 strategy.

Within this framework is very difficult to join innovation and the forecasted employment by VW, maybe a mission impossible.

The challenge of automation and artificial intelligence

Smart machines are replacing the workers in the core cognitive competencies (reading, writing and arithmetic).

According to 2016 report “ The Future of Jobs”, World Economic Forum (WEF)  believes that robotics and artificial intelligence  are leading to a net loss of over 5 million jobs in 15 major developed and emerging economies by 2020. These countries include Australia, China, France, Germany, India, Italy, Japan, the UK, and the US.

 

And a research by Citi and Oxford University  (Technology at Work v2.0: The Future Is Not What It Used to Be 2016) estimated that 57% of jobs across the OECD and 77% in China are at “risk of automation”.

This is the  “automation context” of  the challenge of VW .

Preserving 590.000 workers is maybe a mission impossible.

However, the same challenge involves   every industry in all the sectors of the global economy,  as WEF said in its report.

Foxconn, a key manufacturing partner for Apple, Google, Amazon, and the world's 10th largest employer, has already replaced 60,000 workers with robots.

Toyota introduced industrial robots  into their manufacturing systems to improve quality and reduce costs (30 vehicles/worker vs 16 of VW).

Toyota combine industrial robot technologies with automobile control technologies and state-of-the-art IT technologies. 

China is leading the way of automation and robotization in the industrial processes.

McDonald's ( 1.9 million employees)  chief executive Ed Rensi told Fox Business "It's cheaper to buy a $35,000 robotic arm than it is to hire an employee who is inefficient making $15 an hour bagging French fries

Managing transition and the new opportunities

Bank of England Governor Mark Carney said last month that “ the jobs market is experiencing a great disruption due to technology”.

At the same time Carney highlighted the benefits from the technology innovation : “there is an opportunity for mass employment through mass creativity.

Technology platforms can help give smaller-scale producers and service providers a direct stake in global markets.  Smaller scale firms can by-pass big corporates and engage in a form of artisanal globalisation. A revolution that could bring cottage industry full circle." 

WEF believes that the job losses can be offset by employment growth in other areas, such as computing, math, architecture and engineering.  New technology tends to create more jobs than it destroys : every robot worker will need a maker, a manager, and a maintenance person.

This means that the future in the industrial activities  is for high-skilled employees.

To this end, lifelong learning for training and reskilling the industrial  workers is strategic, in order to keep the knowledge and the management of the new industrial processes and machines.

Furthermore, while machines are replacing humans in core cognitive processing, the designing and supporting jobs based of non-cognitive skills will facilitate the re-employment and new occupation.

For example, in Italy the exploitation of cultural and environmental heritage should be a source of additional  economically viable  occupation,  as well as the enhancement of the artisan heritage in all the sectors.   

The challenge of Volkswagen is a signal for all the companies and the governments of Europe, in the midst of a technological revolution that is running and changing the nature of work.

"Without urgent and targeted action today to manage the near-term transition and build a workforce with futureproof skills, governments will have to cope with ever-growing unemployment and inequality, and businesses with a shrinking consumer base". (WEF)