September 23, 2016 3:00 PM, EDT

Volkswagen’s MAN Plans 1,400 Job Cuts as Turbo-Engine Division Reorganized

Jochen Eckel/Bloomberg News

MAN SE, the German truck-making arm of Volkswagen AG, plans to cut 1,400 jobs at its diesel-engine unit in an attempt to reverse a drop in earnings in that division.

Efficiency measures, including restructuring three businesses so they share more costs, are targeted at boosting profit by 450 million euros ($505 million), Augsburg-based MAN Diesel & Turbo said Sept. 23 in a statement.

Steam-turbine manufacturing will be halted in Hamburg, which will become the site of an after-sales service center, and be focused instead in Oberhausen, Germany, and Bengaluru, India. A compressor factory in Berlin will switch to making turbomachinery components.

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“Our analyses show that we have to be able to adapt to a continuously demanding market environment,” said Uwe Lauber, head of MAN Diesel & Turbo. “The turbomachinery business is facing particular challenges” with orders expected to remain “at their current low level also in the coming years.”

Volkswagen is putting pressure on all its businesses to reduce spending as the car division grapples with the cost of resolving its year-old diesel-emissions cheating scandal as well as preparations for adapting new electric-power and digital technologies. While first-half earnings jumped at Munich-based MAN’s truck unit, profit fell at the diesel and turbine business, whose products include ship engines and power plants, as vessel builders scaled back production amid contractions in the oil and freight industries.

The MAN Diesel & Turbo workforce reductions include about 1,000 positions in Germany, the IG Metall labor union said separately. The division has 14,300 employees worldwide, including 7,300 in its home country, the union said.