Volkswagen’s management is preparing for a tense meeting with its workforce as it outlines plans for significant cost-cutting measures, including potential factory closures in Germany. The meeting, set to take place at the company’s Wolfsburg headquarters, will focus on achieving a 6.5% profit margin by 2026, a significant increase from the 2.3% margin seen in the first half of 2023.
Chief Financial Officer Arno Antlitz and VW brand chief Thomas Schaefer are expected to present the painful cost-reduction strategies, which could impact several factories across the country. These proposals have ignited concern and frustration among workers, many of whom have job security guarantees at Volkswagen’s German plants that have been in place for decades. The automaker is under pressure to cut €10 billion in costs as it faces increasing competition in the electric vehicle (EV) market, alongside a slowing German economy.
Works council head Daniela Cavallo, who was elected to represent the workforce, has openly criticized the company’s plans, warning of heightened emotions and stiff opposition from workers. She intends to express “fierce resistance” to the proposed cuts during the meeting, setting the stage for a potentially uncomfortable confrontation with management. Cavallo also emphasized the need for the company to protect jobs and explore alternatives before considering drastic measures like plant closures.
Volkswagen is also set to negotiate with labor unions, including IG Metall, in October over wage increases. However, union leaders are pushing to start these talks sooner to address the broader implications of the automaker’s cost-cutting proposals. Thomas Knabel, a representative for IG Metall at Volkswagen’s Zwickau plant, stated that negotiations cannot move forward unless the company retracts its threat to close factories.
While management points to external factors such as economic challenges and new market competition, labor unions argue that Volkswagen’s inefficient production strategies and slow transition to electric vehicles are partly to blame for its financial difficulties. Investors and analysts are calling for swift action to bring costs under control, but they acknowledge that navigating these changes within such a large and complex organization will not be easy.
Philippe Houchois, an analyst at Jefferies, commented on the delicate situation, noting that while Volkswagen’s leadership and unions have historically found ways to reach a consensus during tough times, the process is unlikely to be smooth.
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