VW Labor Boss to Block Investment Without Production Accord

  • Negotiations heat up as decision on investment strategy looms
  • Supervisory board set to vote on budget in mid-November

Bernd Osterloh, labor leader of Volkswagen AG.

Photographer: Krisztian Bocsi/Bloomberg

Volkswagen AG’s worker representatives will block investment decisions unless the German carmaker’s management commits to production programs that secure jobs, top labor leader Bernd Osterloh said in an interview.

The hard-line stance sets up tense negotiations in the coming weeks over the so-called Future Pact. The labor agreement at Volkswagen’s namesake brand is aimed at cutting costs to help the carmaker’s biggest unit absorb the fallout from the emissions-cheating scandal while also funding investment in electric cars and autonomous driving.

“Without the Future Pact and the decision on concrete products and factories, we as worker representatives can’t approve the investment planning in the supervisory board,” Osterloh said in an interview at his office near the factory floor of Volkswagen’s main plant in Wolfsburg.

Volkswagen’s supervisory board is set to meet in mid-November to sign off on its annual investment plan, which usually sets out billions of euros in spending for the coming five years. The budget this year is critical as the manufacturer accelerates a shift to new auto technologies to emerge from the scandal that erupted in September 2015. Volkswagen declined to comment on Osterloh’s remarks.

The company, which employs more than 600,000 people worldwide, could trim as many as 2,500 jobs a year through attrition and early retirement offerings, Osterloh said. German daily Frankfurter Allgemeine Zeitung reported Friday that Volkswagen human resources chief Karlheinz Blessing predicted the shift to electric vehicles might lead to the disappearance of at least 10,000 positions over time.

Savings Targets

Employee leaders have enormous influence at Volkswagen. Including Osterloh, they occupy half the 20 seats on the supervisory board, and the German state of Lower Saxony’s two representatives tend to side with workers.

Management and unions will also battle over details of the savings plan at the VW brand. The manufacturer has outlined a target of 3.7 billion euros ($4 billion) through 2020, with German plants accounting for the bulk of the cuts, according to people familiar with the matter. 

Worker representatives estimate the division could save at least 2 billion euros, and possibly double that amount, if Volkswagen accepts employees’ proposals on topics such as reducing duplication across the group.

The strategy talks are complex, with more than 60 company and labor officials involved. Six task forces are dealing with areas such as vehicle production, technical development and administration. Osterloh said top executives should contribute to the savings effort, and that labor leaders “will support an overhaul of the management board’s remuneration.” Volkswagen Chairman Hans Dieter Poetsch is drafting a revamp of pay scales for top brass following criticism of bonus amounts after the diesel scandal came to light.

Pact ‘Essential’

The VW brand, which was struggling even before the diesel-emissions manipulation crisis, has been further burdened by additional costs and a tarnished image. In the third quarter, operating profit tumbled 55 percent and margins halved to 1.5 percent of revenue. 

Volkswagen is sticking to a pre-crisis target for the VW brand’s return on sales to rise to 6 percent, though the timeframe is uncertain, Chief Financial Officer Frank Witter told analysts on Thursday. This year, the marque “is fighting” to achieve a 2 percent margin, and the future pact will be “essential” to improving earnings in coming years.

“We’ve made progress in the negotiations, but there are still no firm commitments from the management board on which cars are to be produced at which factory with which volume,” Osterloh said. “Without these commitments, there is no Future Pact.” 

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE