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VW labour bosses accuse management of breaking promises
February 8, 2017 / 3:34 PM / 5 months ago

VW labour bosses accuse management of breaking promises

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FILE PHOTO: The Volkswagen logo is seen at the Frankfurt Motor Show (IAA) in Frankurt, Germany, September 10, 2013.Pawel Kopczynski/File Photo

BERLIN (Reuters) - Volkswagen's (VOWG_p.DE) works council has accused top executives of breaching a cost-cutting deal, risking fresh trouble at the German carmaker as it struggles to overcome its emissions scandal.

In a letter to VW brand chief Herbert Diess, seen by Reuters, the labour leaders said he and personnel boss Karlheinz Blessing had breached the terms of November's "future pact" by ruling out possible hirings in the first half of 2017 and cutting temporary jobs more quickly and deeply than agreed.

"The ink on the contracts was hardly dry, and brand management blatantly infringed the agreements and the spirit of the future pact," a works council spokesman said.

VW said the pact will be implemented, but there were likely to be tensions.

Europe's largest automaker is under pressure to make cuts at high-cost operations in Germany to fund a shift to electric cars and mobility services as it tries to move on from its emissions scandal, while still grappling with billions of euros in related costs.

Managers and labour leaders agreed in November to cut 30,000 jobs at the VW brand in exchange for a commitment to avoid forced redundancies in Germany until 2025, a deal that leaves profitability still lagging rivals.

But the turnaround plan won't yield the quick savings that Diess, who was known as a cost-cutter at BMW (BMWG.DE), is seeking as VW courts investors with a recovery strategy.

The future pact will lead to 3.7 billion euros ($4 billion) in annual savings by 2020 and lift the VW brand's operating margin to 4 percent that year from an expected 2 percent in 2016 -- not enough, analysts say, given the carmaker's cost-cutting potential.

Management plans to scrap a costly night shift for the top-selling Golf hatchback, which accounted for over half of the Wolfsburg factory's output of 808,000 cars last year, also contradict the future pact, according to the letter signed by works council boss Bernd Osterloh and nine other labour representatives.

To pressure executives to comply with the November agreement, labour leaders said they would halt cooperation on issues such as overtime work, reducing the number of apprenticeships and possibly extending the workweek to 40 hours for engineers.

VW shares closed 1.4 percent lower on Wednesday at 139.90 euros.

Osterloh, the top labour representative on the 20-strong VW supervisory board, has clashed repeatedly with Diess over where to make savings ever since Diess joined VW in July 2015.

The signatories called on the former BMW executive and Blessing to explain by Monday how management aimed to help resolve the dispute.

Germany's Manager Magazine reported news of the letter earlier on Wednesday.

($1 = 0.9339 euros)

Reporting by Andreas Cremer; Editing by Mark Potter/Ruth Pitchford

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