Volkswagen CEO's restructuring plan rejected by key board members
What's the story
Volkswagen AG's CEO Oliver Blume is facing major challenges in his efforts to revamp Europe's largest carmaker. His plans, which include job cuts and plant closures in Germany, were rejected by 12 of the 19 supervisory board members at a meeting on Thursday. The rejection has left Blume without the support of labor representatives and Lower Saxony state government, VW's second-largest shareholder.
Company statement
VW's vague commitments after supervisory board meeting
After the supervisory board meeting, VW only gave vague commitments. The company promised to simplify its extensive product portfolio and focus on the most lucrative market segments. However, Jefferies analyst Philippe Houchois noted that there was "no indication of progress toward an agreement having been reached on either plant closures, five-year investment plan or additional headcount reduction."
Cost concerns
Struggle to cut down carmaking costs in Germany
VW has been struggling to cut down carmaking costs in Germany, which are about two-thirds higher than those in Portugal and Spain. High labor and energy costs, bureaucratic burdens, a workforce used to generous bonuses, and the power base to protect its interests are key factors contributing to this challenge. Despite these hurdles, Blume remains optimistic about the company's future.
Optimism
Blume's statement
In a statement on Friday, Blume said the management board "is taking responsibility for the company's sustainable future, at a time when the automotive industry is under intense pressure worldwide." He added that the comeback plan is "positioning the group to be even more robust and competitive, even in a highly challenging global environment." However, labor unions have responded with more pressure on management.
Union demands
Labor unions demand answers from Blume
VW works council chairwoman and supervisory board member Daniela Cavallo has demanded Blume explain himself to the company's workforce. Labor officials accused management of creating fear over job losses and have asked Blume and his team to respond by Friday to over 80 questions detailing their restructuring plan. After he failed to comply, the works council announced special meetings for staff after the summer break where Blume will have to answer directly.