VW warns time is running out as workers clash over cuts

By Victoria Waldersee and Christina Amann

WOLFSBURG, Germany (Reuters) – Volkswagen has “one, maybe two” years to turn around its main car brand, the carmaker’s finance chief said on Wednesday as he tried to convince workers at a stormy meeting to back the plans of deep cost reduction, including German. plant closures.

Minutes late, as staff whistled and shouted “Auf Wiedersehen” – German for “goodbye” – when he took the stage, Arno Antlitz appealed to the shared responsibility of staff and management to cut costs if the brand will survive the transition to electric cars.

In a room full of 16,000 workers and another 5,000 on screen, Antlitz said that Europe’s car market had shrunk after the pandemic and that the company was facing a shortfall in demand of about 500,000 cars, the equivalent of about two factories.

“The market just isn’t there,” he told the meeting at Volkswagen’s Wolfsburg headquarters. He added that sales were not expected to recover and that VW’s core brand had “one, maybe two” years to cut costs and adjust production.

In response, works council head Daniela Cavallo said management had “massively damaged trust” and compared the threat to close factories to a “bankruptcy declaration”.

Cavallo urged CEO Oliver Blume, who was not scheduled to give a speech, to address staff and explain why the group is prioritizing spending on a €5bn software partnership with US start-up Rivian, face of job protection in Germany.

The prospect of site closures at one of Germany’s best-known companies has raised several red flags for Europe’s biggest economy, which is struggling with anemic growth, weaker export demand, higher costs and competition from abroad.

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

Labor Minister Hubertus Heil pledged 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 jobs and prevent the site from closing.

Scholz’s cabinet was expected on Wednesday to agree on proposed tax cuts to boost demand for electric vehicles, which has exceeded expectations.

Underscoring the tough context, business sentiment in the German auto industry slipped further into negative territory in August, the Ifo economic institute said on Wednesday.

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Volkswagen, whose brands also include Audi, SEAT and Skoda, said on Monday it was considering closing factories in Germany and ending a decades-old warranty at six of its plants in an attempt to deepen a 10 billion euro cost euros ($11 billion). the cutting plane. It targets 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 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 labor groups with seats on Volkswagen’s supervisory board, cannot imagine starting negotiations without the company taking the threat of plant closures off the table, it warned he 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 were 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 with a complex power structure formed over its 87-year history. year old.

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

(1 USD = 0.9058 euros)

(Reporting by Victoria Waldersee, Christina Amann, Andreas Rinke; Writing by Victoria Waldersee and Matthias Williams; Editing by Jamie Freed and Mark Potter)