VW chief fights for survival, defends savings

7th March 2006, Comments 0 comments

7 March 2006, WOLFSBURG - German carmaker Volkswagen AG chief Bernd Pischetsrieder mounted Tuesday a strong defence of his tough savings programme as he fights for survival as the group's head.

7 March 2006

WOLFSBURG - German carmaker Volkswagen AG chief Bernd Pischetsrieder mounted Tuesday a strong defence of his tough savings programme as he fights for survival as the group's head.

"There is no alternative for our group," Pischetsrieder told a press conference in the northern German city of Wolfsburg where the group is based. "Volkswagen has to build cars more cheaply," he declared. Europe's biggest car manufacturer is facing tough competition in its key markets.

"It is necessary for further substantial efforts to secure the lasting future of Volkswagen AG," he said, adding that VW would achieve its 5.1 billion euros (6.1 billion dollars) pretax profit target in 2008 as it pressed on with the launch of new models and updates of its existing car range.

But overshadowing the annual press conference has been a growing corporate power struggle within VW over Pischetsrieder's future after the group's chairman Ferdinand Piech raised doubts about his tenure as chief of VW which includes the VW, Skoda, Bentley and Bugatti brands.

Adding to the pressure on Pischetsrieder, 58, have been signs that union representatives on the company board might withdraw their support for extending his contract as concerns grow among workers about big job cuts.

But Pischetsrieder hit back, telling Tuesday's press conference that "VW factories were at a strong disadvantage in terms of international productivity."

The aim, he said was to make the company "weather proof" with VW hoping to boost productivity by 30 per cent over the next three years.

Echoing Pischetsrieder's comments, VW's finance chief Hans Dieter Poetsch told the press conference: "Unless in particular the traditional German plants are restructured, no long-term future for the Volkswagen group would be conceivable, even if all the other parts of the group reach their earnings targets."

An extraordinary supervisory board meeting set down for April 19 and 20 is to decide whether or not to extend Pischetsrieder's contract, which runs until early next year. He has been company chief since 2002.

Pischetsrieder has already secured the backing of Lower Saxony Premier Christian Wulff in his battle to hold on to his job. The state of Lower Saxony, where VW is based holds a 16.9 per cent stake in VW.

With union representatives holding one half of the 20 seats on the board, Pischetsrieder appeared to accept that he faces a tough battle to hold on to his job, telling the press conference: "You can only be the leader of a company if you take the workforce with you."

Martin Winterkorn, the head of VW luxury car making offshoot, Audi, Porsche chief Wendelin Wiedeking and VW brand director Wolfgang Bernhard have emerged as possible candidates to take over from Pischetsrieder.

The turmoil over Pischetsrieder's contract comes in the wake of an embarrassing sex and bribery scandal that rocked the company last year and led to a string of high-profile resignations.

Underscoring the problems facing the carmaker at its VW brand, the company is currently in the middle of a major restructuring with the group also in talks with labour representatives to cut 20,000 jobs amid threats of plant closures in Germany.

This follows a deal signed in 2004 between VW and the unions to secure 103,000 jobs until 2011 in return for longer hours and pay cuts.

As a result of the company's savings programme "ForMotion," earnings before tax in 2005 rose by 58 per cent over 2004 to 1.7 billion euros. "ForMotion" resulted in savings of 3.5 billion euros last year, which was more than the 3.1 billion euros the company had expected.

Deliveries increased last year by 3.2 per cent to 5.24 million cars compared to 2004, the company said, despite intense competitive pressures in the group's key markets in China and the US.

While signs of improvement emerged in its North American operations, VW's business in China plunged into 119 million euros loss compared to a profit of 222 million in the previous year.

Operations in the Asia-Pacific region also swung into an 88 million euro loss from a profit of 208 million euros.

The automaker also had a good start to 2006 with world-wide deliveries of VW cars coming in at 790,000 in January and February, representing a 15 per cent increase over the same period last year.

Pischetsrieder's reaffirmation of his commitment to honing back costs helped to underpin VW shares Tuesday, which were trading up 1.3 per cent at 57.75 euros by lunchtime.

DPA with Expatica

Subject: German news

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