Written by Victoria Waldersee and Christina Amann
BERLIN (Reuters) – For all its talk of radical change, Volkswagen’s cost-cutting deal in Germany relies heavily on the automaker’s tradition of cooperation between managers and workers, according to details revealed by company sources.
That has left some investors and analysts wondering whether it can deliver on its promises to cut production capacity and 35,000 jobs, changes that managers say are vital to the company’s survival amid weak demand and cheap Chinese competition.
The deal was struck days before Christmas, and since workers returned from the holidays, unions have been holding meetings across German factories – some with board members present – to explain it, according to two labor sources.
The agreement includes giving each plant its own cost-cutting target, with project teams of worker representatives and managers responsible for figuring out how to achieve that and boost productivity, which is measured by the number of cars produced per worker, according to two sources close to management. .
The administrative sources added that prominent figures from both sides will present progress reports at a quarterly meeting, stressing that if the interim cost reduction goals are not achieved, negotiations may need to start again.
It is a model that bears all the hallmarks of Volkswagen’s tradition of cooperation and compromise, rather than change imposed from above which would have brought more certainty, but was also at risk of damaging strikes.
Many questions remain, from how the automaker will lose so many workers without laying anyone off, to when the promised reduction in production capacity will occur, to what the long-term future holds for factories with empty halls.
That has left some investors disappointed, with Volkswagen shares trading below levels seen in October, before quarterly earnings fell.
“People don’t have the patience to invest in auto stocks that trade mostly on next year’s earnings, hoping the company will regain profitability after 3 to 5 years,” said Patrick Hamel, an auto analyst at UBS. The market expects them to talk about the fundamentals – what is the ultimate impact in 2025?”
The risks are high. While the Volkswagen group spans brands from luxury Audi to mass-market Seat and Skoda, its core namesake brand – the bulk of its German business – will account for more than half of its car sales in 2023.
Cutting capacity
During lengthy talks, the unions said the company raised the possibility of closing three to four factories. Volkswagen declined to give a specific number, but has repeatedly said it cannot rule out factory closures.
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