Evaluation-Volkswagen seeks latest era in Germany with old methods

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 employees, in keeping with details disclosed by company sources.

That has left some investors and analysts questioning whether it will possibly deliver on guarantees to chop capability and 35,000 jobs – changes that managers say are vital to the business’s survival amid weak demand and low-cost Chinese competition.

The deal was struck days before Christmas, and since employees returned from the vacations unions have been holding meetings across German factories – some with board members in attendance – to elucidate it, in keeping with two labour sources.

The agreement involves each factory being given its own cost reduction goal, with project teams of labour representatives and managers chargeable for determining the right way to deliver it and boost productivity, measured by the variety of cars produced per employee, in keeping with two sources near management.

Senior figures from each side will give progress reports at a quarterly meeting, the management sources added, emphasising that if interim cost reduction targets aren’t met, negotiations might have to start again.

It is a model that bears all of the hallmarks of Volkswagen’s tradition of cooperation and compromise, slightly than change imposed from the highest that might need brought more certainty, but in addition have run the chance of damaging strikes.

Many questions remain, from how the carmaker will lose so many employees without laying anyone off, to when the promised production capability cuts will occur, to what the long-term future holds for plants with empty halls.

That has left some investors underwhelmed, with Volkswagen shares trading below levels seen in October, before a plunge in quarterly profits.

“People don’t have the patience to take a position in an auto stock that trades predominantly on next yr’s earnings, with the hope that 3-5 years out, the corporate will restore its profitability,” said Patrick Hummel, auto analyst at UBS. “The market will expect them to speak concerning the constructing blocks – what’s the underside line impact in 2025?”

The stakes are high. While the Volkswagen group spans brands from the upmarket Audi to the mass-market SEAT and Skoda, its core namesake brand – the majority of its German business – accounted for greater than half of its vehicle sales in 2023.

CUTTING CAPACITY

During protracted talks, unions said the corporate raised the prospect of closing three to 4 factories. Volkswagen declined to present a particular figure, but said repeatedly it couldn’t rule plant closures out.

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