Volkswagen confronts labor over cutbacks proposed by Reuters

By Victoria Waldersee

BERLIN (Reuters) – Volkswagen ( ETR: ) management will face a tense and fearful workforce at a meeting at its headquarters on Wednesday as it proposes painful cutbacks, including closing factories in Germany, to meet an ambitious profit target of its namesake brand.

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

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

Cavallo warned that emotions will run high and leadership will be “very uncomfortable” at the meeting, which will last several hours.

Volkswagen said on Monday it was considering an unprecedented move to close factories in Germany and end a decades-old job guarantee at six of its factories in a battle to deepen efforts to cost reduction of 10 billion euros ($11.04 billion). The automaker is targeting a 6.5 percent profit margin on the brand by 2026, up from 2.3 percent in the first six months of this year.

Unions and management at Volkswagen in Germany are due to negotiate a pay rise in October, but labor representatives want to push it forward and have a wide-ranging discussion on the carmaker’s options, according to Thomas Knabel, representative of the IG Metall union at Volkswagen. Zwickau plant.

But the union, one of Germany’s most powerful stakeholder groups with seats on Volkswagen’s supervisory board, cannot imagine starting negotiations without the company taking the threat of plant closures off the table, he warned in an interview.

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

While management blamed its financial woes on Germany’s worsening economic environment and new competitors entering the market, labor representatives said the automaker’s production strategy was ineffective and policymakers had been too slow to invest to produces a mass electric vehicle.

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

“In difficult times, management and unions have the ability to reach consensus,” said Jefferies analyst Philippe Houchois. – But it won’t be smooth.

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