VW bosses win clearance to cut labour costs

20th April 2006, Comments 0 comments

20 April 2006, WOLFSBURG, GERMANY - Volkswagen's management won authorization Thursday from the main board to open talks with labour leaders on tough restructuring at the poorly performing German car manufacturer.

20 April 2006

WOLFSBURG, GERMANY - Volkswagen's management won authorization Thursday from the main board to open talks with labour leaders on tough restructuring at the poorly performing German car manufacturer.

Chief executive Bernd Pischetsrieder said he was told to open talks with the VW works council, an internal body representing the labour force, and the main trade union, IG Metall, with the objectives now defined by the supervisory board.

Earlier this year he warned that 20,000 Volkswagen employees would be "affected" by changes, without saying if this meant firing them. A German newspaper, Sueddeutsche Zeitung, said Thursday that the Volkswagen plants had a surplus of 40,000 unnecessary workers.

The CEO said the board, which comprises staff and shareholder representatives, had decided to wait until its next meeting, on May 2, to discuss his own contract. He seeks to remain in the job beyond 2007, but faces the threat of a veto from the labour side.

Ferdinand Piech, a former Volkswagen chief executive often described as the company's patriarch, said he was "very satisfied" with the chief executive. Piech faces a revolt at a shareholder meeting May 3 for allegedly undermining the CEO in the past.

The supervisory board completed two days of debate on the crisis at the main Volkswagen brand, where factory costs are much higher than at rival makers. VW also owns the Skoda and Seat companies.

Volkswagen also said it was selling its 50-per-cent stake in Mechatronik, a maker of fuel-injection systems for diesel engines, to the German company Siemens, which already owns the other half. The sale price remained confidential.

The carmaker said it would be deciding within the next six weeks whether to open a new plant in Russia. VW is contemplating building a plant in the Moscow region to supply 115,000 cars annually for the Russian market only.

Volkswagen's supervisory board is composed of equal numbers of staff and shareholder delegates, which forces rule by consensus. The management must win over union leaders who sit on the main board.

Shareholder activists, who charge that the company is not profit- oriented, are pressing to hold a vote on May 3 to sanction Piech, who retires from the chairmanship next year.

SdK, a shareholder association, said Thursday it would join two German investment funds, DWS and Deka, in a revolt against Piech who it accused of setting a "perfect example of bad corporate governance" in his earlier remarks about the chief executive.

The association also accused Piech of choosing a new personnel director who was not wanted by Pischetsrieder.

SdK said it believed it could rally sufficient proxies to force a vote on sanctions, although analysts said it was implausible the rebels would actually win such a vote.

To force a vote at the Hamburg meeting, SdK and its allies would have to command votes representing 390,000 Volkswagen shares.

DPA

Subject: German news

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