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VW wants cost cut deal by Friday - report

By Graeme Roberts | 17 November 2016

Volkswagen wants a cost-cutting deal with workers by Friday to help fund investment in electric and self-drive cars but accounts of discussions in just one area show how difficult it is, a media report said.

Union leaders do not want workers to carry the can for the diesel emissions scandal for what they see as the mistakes of managers, Reuters reported.

The main sticking point of the talks is how to ensure the future of its German factories as it seeks to cut some traditional roles making combustion engines in favour of new positions producing batteries and electric engines.

Neither VW nor its labour unions would comment to Reuters on the progress of the talks but details from three company sources of discussions over the assembly of plastic parts shed light on their complexity.

VW brand chief Herbert Diess, a former executive at BMW, which is less vertically integrated than VW, has sought to end production of some plastic parts including fuel tanks and bumpers at the Wolfsburg base, the three sources told the news agency.

Yet, in a sign of the scale of the challenge, a new 1,500-square metre hall with blow-moulding technology to make more plastic tanks went on stream only in September, the sources said.

Unions have so far blocked Diess's plan, which would involve cutting several hundred of the 3,000 jobs involved in making plastic parts, an area competitors have long since outsourced.

Management and labour are also discussing the outsourcing of some production of plastic parts at Braunschweig near Wolfsburg, one of the sources told Reuters. Those talks involve compensating staff by assigning more orders for chassis and steering assembly which will become more relevant with self-driving cars.

Two VW factories in particular are hoping to benefit from the post-dieselgate expansion into zero-emission technology: Salzgitter, which now makes combustion engines and Kassel, VW's biggest component plant making gearboxes, engines and emission systems.

One company source indicated to Reuters an overarching deal could be reached by Friday, but others did not confirm the prediction.

The report said the VW supervisory board is due to meet on Friday to approve spending on plants, equipment and models across the multi-brand group until the end of the decade but needs prior agreement with the works council on restructuring and jobs.

Managers want to cut annual costs at the core VW brand by EUR3.7bn (US$3.99bn) to the end of 2021 to help fund VW's transformation while facing billions of euros in costs from its emissions scandal.

But labour leaders, who occupy almost half the seats on the group's 20 member supervisory board, have said they will not approve any cutbacks without management committing to fixed targets and quotas for product, output and investment.

"They urgently need to bring about change and not settle for a shaky compromise," Bankhaus Metzler analyst Juergen Pieper told Reuters.

Pieper argued that the group should be able to shed a third of its global 610,000-workforce and shut about 10 of its 120 plants. VW has ruled out forced layoffs but may cut up to 25,000 staff by waiting for people to retire.

Sources have told Reuters it plans to double this year's expected operating margin of 2% by 2020 and lift it to 6% by 2025. That is below current profitability benchmarks at Ford, PSA and Toyota.