layoffs, plant closures needed to fix carmaker’s problems By Reuters

FRANKFURT (Reuters) – Volkswagen (ETR:) sees no chance of avoiding layoffs and plant closures in order to cut 4 billion euros ($4.2 billion) in costs, the brand’s chief executive said in a newspaper interview, amid an escalating dispute with workers.

Thomas Schaefer’s comments further deepen a conflict with unions, who have threatened strikes at the carmaker from December and have asked the company to present solutions in ongoing negotiations over pay and capacity that exclude both factory closures and major job cuts.

“Ultimately, any solution must reduce both overcapacity and costs. We can’t just stick a band-aid on it and keep dragging it along. That would come back to bite us later in a serious way,” Schaefer told weekly Welt am Sonntag.

Schaefer said most of the envisaged job cuts at the German carmaker, which the group has not quantified, could be done via normal attrition and early retirement, adding however that this would not be enough.

“It would simply take too long. There is no point in delaying restructuring until 2035. By then, our competition would have left us behind,” he said, adding VW’s restructuring should rather be done within 3-4 years.

Apart from job cuts and plant closures, Volkswagen has also asked workers at the VW AG unit, which is at the heart of the current conflict, to take a 10% pay cut.

Schaefer said there was no hope at the moment that demand in Europe would recover significantly. He also noted that labour costs in Volkswagen’s German sites were roughly twice as high as those of peers and VW’s own sites in southern and eastern Europe.

He said ongoing savings efforts had resulted in a positive effect on profits of around 7.5 billion euros, adding a further 4 billion euros in savings were needed.

Schaefer said the company currently saw no possibility to avoid plant closures in Germany, adding potential shutdowns not only referred to vehicle factories, but also to component sites.

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