Volkswagen goes head-to-head with workers over proposed cuts

By Victoria Waldersee and Christina Amann

WOLFSBURG, Germany (Reuters) -Volkswagen management is facing workers at a crunch meeting at its headquarters on Wednesday as the automaker seeks to push through deep cost cuts - including factory closures in Germany - in an effort to revive profits 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 northern Germany built to house the massive Volkswagen (ETR:VOWG_p ) plant.

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

The prospect of site closures at one of Germany's most storied companies has raised more red flags for Europe's largest economy, which is battling anaemic growth, weaker export demand, higher costs and strong competition from abroad.

Fresh from a drubbing in regional elections that saw a surge in support for the far right, Chancellor Olaf Scholz has made Volkswagen a top priority and coordinated with company executives and union members, a source familiar with the matter said.

Labour Minister Hubertus Heil promised support, telling RTL/ntv that "Germany must remain a strong car country." But he did not specify what kind of support and said the company must first do its job to secure employment and prevent site closures.

Underscoring the difficult backdrop for the talks, business sentiment in the German automotive industry as a whole slid further into negative territory in August, the Ifo economic institute said on Wednesday.

Cavallo warned emotions would run high and management would 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 drive to deepen a 10 billion euro ($11 billion) cost-cutting plan. The automaker is targeting a 6.5% profit margin at the VW 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 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 decision-makers 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 with a complex power structure formed over its 87-year history.



"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."

($1 = 0.9058 euros)

Source: Investing.com