Volkswagen must cut costs faster to change, chairman says

VOLKSWAGEN’S controlling families dialled up the pressure on the German auto group’s stakeholders on Friday (Aug 7), backing management’s push for a dramatic restructuring that could cost tens of thousands more jobs.

Speaking as Porsche, the investment vehicle of the Porsche/Piech auto dynasty and Volkswagen’s top shareholder, announced a drop in its adjusted post-tax earnings, its board chairman Hans Dieter Poetsch said the Volkswagen group “is at a historic crossroads”.

“For the sake of the company and its sustainable competitiveness, everyone must now step up and take responsibility,” Poetsch said.

“The longer decisions are delayed, the bigger the problems will become,” he added.

The comments drew an angry response from Germany’s top industrial union, which accused the families of placing dividends above workers.

Rising costs, competition from China

Volkswagen CEO Oliver Blume has pledged to drastically overhaul the group – which includes the VW mass-market business, premium brands Porsche and Audi, and luxury marque Lamborghini – as it battles high costs, tariff woes and intensifying competition from China.

Porsche finance chief Johannes Lattwein called on the group to reduce excess capacity, significantly cut costs, and strengthen decision-making.

Having already overseen tens of thousands of job cuts, Blume’s latest restructuring plan threatens another 50,000 layoffs and the possible closure of four German plants.

The plan still needs the blessing of powerful labour representatives and the state of Lower Saxony, which has a 20 per cent blocking minority, setting the stage for tense talks in the second half of the year.

SEE ALSO

Porsche to shed 5,000 jobs by 2035 under German factory pact

Mercedes cuts revenue outlook as China luxury slump deepens

Sources told Reuters that the labour side and Lower Saxony voted against Blume’s plan at the last supervisory board meeting in July. The next meeting is expected in early September.

Volkswagen declined to comment on the matter. A company source said Porsche’s position was understood as support for Blume’s restructuring course.

The IG Metall union, which sits alongside representatives from Porsche, the works council and the state of Lower Saxony on Volkswagen’s fractious supervisory board, said it would continue to defend workers and oppose plant closures.

“To secure their dividends, the (owner families) seem willing to jeopardise the livelihoods of those who have generated these profits in the first place over many years,” a union spokesperson said.

He said competitiveness would come not from stringent cuts but from attractive products, innovation and a clear forward-looking strategy.

The works council took note of Porsche’s comments but declined to comment further pending internal discussions on the group’s future. The Lower Saxony state government did not immediately respond to a request for comment.

‘Every option’ must be considered

Lattwein said Porsche supports Volkswagen’s management and its proposals, adding: “Competitiveness is the goal. Every option must be considered in pursuing it.”

Porsche – which owns 31.9 per cent of Volkswagen and 12.5 per cent of Porsche – reported a 14.5 per cent drop in its adjusted half-year earnings after tax to 949 million euros (US$1.1 billion) on Friday.

Shares in the holding group dropped by as much as 1.7 per cent after the earnings report before paring back their losses later in the day. Shares in Volkswagen and Porsche, largely flat early Friday, have fallen sharply in recent years.

Including impairment losses booked for its two core investments, Porsche swung to a net loss after tax of 2.2 billion euros in the first six months of the year, down from a 338-million-euro profit a year earlier. BLOOMBERG