Volkswagen executives warn works council of job cuts

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Executives at Volkswagen are warning of job cuts, as negotiations with the group’s powerful works council heat up while the German carmaker prepares the ground for a €10bn cost-cutting programme.

At a meeting with union representatives on Monday, the head of the Volkswagen brand Thomas Schäfer warned that the flagship business was not making “enough profit with our cars to independently finance the transition [to electric vehicles] and our own future”.

“Our administration is too expensive, our factories are not productive enough and our costs are significantly higher than the competition,” Schäfer said, according to an internal memo seen by the Financial Times.

The VW brand in June announced plans to cut €10bn in costs by 2026 in an effort to boost profit margins in an increasingly competitive market for electric vehicles, as Chinese carmakers such as BYD push into Europe. Schäfer said on Monday that incoming orders “especially for electric cars, are below our ambitious expectations”.

The group, a fifth of which is owned by the German state of Lower Saxony, also produces the Porsche, Audi and Škoda brands. It has a notoriously large workforce, which is closely protected by the country’s strong unions, and its own works council — a group of elected staff representatives who negotiate with management.

Works council chair Daniela Cavallo in July had argued that the cost cuts would come about without “shedding jobs” — a red line she reaffirmed on Monday, according to the memo, stating that she would make VW stand by an agreement to secure jobs until 2029.

Instead, she said better management of the company and collaboration between its different brands was the “most important area of action”.

Clashes with the works council were partially to blame for the abrupt resignation of former VW group chief executive Herbert Diess last summer after he claimed the company had at least 30,000 excess staff among its 230,000-strong workforce in Germany.

Gunnar Kilian, VW’s board member for human resources, on Monday said the company would take advantage of the “demographic curve” and reduce jobs by not replacing some retiring employees.

But he warned that VW would eventually “have to get on with fewer people in many corners [of the company]”.

“If we want to future-proof the VW brand, we also have to become more efficient in the use of personnel and openly discuss the issue of labour costs internally,” Kilian said, according to the internal memo.