Volkswagen to cut up to 20,000 workers

[pdoel]

Volkswagen to cut up to 20,000 workers

FRANKFURT (Reuters) - Volkswagen expects to cut up to 20,000 employees in the next three years at its core VW brand in a sweeping restructuring program that could also see production capacity cut, the company said on Friday.

Shares rose more than 6 percent following the news and on the back of better than expected 2005 earnings and a upbeat forecast for 2006 from Europe's biggest carmaker.

It said it expects higher operating profit before special items this year, along with slightly higher revenue.

Thanks primarily to a 3.5 billion euro ($4.2 billion) gross earnings boost from its "ForMotion" program, Volkswagen reported a 70 percent rise in operating profit to 2.79 billion euros even after posting a hefty one-off charge of 351 million euros last year.

Profit before taxes, a key figure since it includes the contribution from VW's two joint ventures in China, rose nearly 60 percent to 1.72 billion euros. After tax, the group earned 1.12 billion, a gain of just over 60 percent.

Volkswagen proposed raising its dividend to 1.15 euros per ordinary share from 1.05 euros the previous year.

Net cash flow at its core automotive division increased 30 percent to 2.39 billion euros, helped by restrained investment spending. Analysts closely watch its cash management due to VW's difficulties in the past to finance its own growth from its main business.

Thanks to the improved liquidity, VW plans to buy back up to 2 billion euros in bonds issued by its automotive division. It also plans to cancel its 41.7 million treasury shares.