Volkswagen goes head-to-head with workforce over proposed company cuts

By Victoria Waldersee

BERLIN (Reuters) – Volkswagen (ETR:VOWG_p) management will face a tense and fearful workforce at a meeting in its headquarters on Wednesday as it proposes painful cuts, including factory closures in Germany, to hit an ambitious profit target at its namesake brand.

Chief Financial Officer Arno Antlitz and VW brand chief Thomas Schaefer will give speeches detailing the automaker’s plans at the meeting in Wolfsburg, a small city in northwest Germany built to house the massive Volkswagen plant.

Works council head Daniela Cavallo, who was elected by workers, will make clear her “fierce resistance” to cuts, she told reporters on Monday.

Cavallo warned emotions will run high and management will be “very uncomfortable” at the meeting, expected to last several hours.

Volkswagen said on Monday it was considering taking the unprecedented move of closing factories in Germany and ending a decades-old job guarantee at six of its plants in a scramble to deepen a 10 billion euro ($11.04 billion) cost-cutting drive. The automaker is targeting a 6.5% profit margin at the brand by 2026, up from 2.3% in the first six months of this year.

Unions and Volkswagen management in Germany are due to negotiate over a wage increase in October, but labour representatives want to pull that forward and have a wide-ranging discussion on the carmaker’s options, according to Thomas Knabel, representative for the IG Metall union at Volkswagen’s Zwickau plant.

But the union, one of Germany’s mightiest labour stakeholder groups with seats on Volkswagen’s supervisory board, cannot imagine starting negotiations without the company taking its threat to close down plants off the table, he warned in an interview.

“We need to agree on the rules of the game,” he said.

While management laid blame for its financial woes on the worsening economic environment in Germany and new competitors entering the market, labour representatives said the carmaker’s production strategy was inefficient and decisionmakers had been too slow in investing to produce a mass-market electric vehicle.

Whatever the cause, the company must make quick decisions about where to cut costs, investors and analysts said – a challenging task for a firm of its size and complexity.

“In difficult times, management and unions have an ability to get to consensus,” Jefferies analyst Philippe Houchois said. “But it’s not going to be smooth.”

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