Volkswagen CEO Faces Union Challenge on Massive Job Cut, Plant Closure Plan
Volkswagen's Structural Overhaul and Leadership Test
By Nick Carey, Christina Amann and Rachel More
LONDON/BERLIN, July 6 (Reuters) - Volkswagen CEO Oliver Blume faces perhaps the biggest test of his leadership this week: persuading the German carmaker's supervisory board to accept painful job cuts and factory closures as it struggles to fend off Chinese rivals.
Members of the board meet at the company's headquarters in Wolfsburg on July 9 to discuss what analysts say could be the most far-reaching structural overhaul in the history of the world's second-largest automaker.
The plan, which faces strong opposition from unions and key shareholders that could block it, would mark a defining moment for Blume, 58, as Volkswagen faces mounting pressure from Chinese rivals, shrinking margins and stiff tariffs on car imports into the United States.
Blume's Restructuring Plan and Its Implications
"He has to get this done. With the market becoming hyper competitive there is no other option," said independent auto analyst Matthias Schmidt, estimating Blume's chances of success at 50-50 with a potential compromise involving the closure of two of the proposed four plants.
Blume's plans, sources familiar with them say, include significant cost reductions, the four plant closures and roughly 50,000 extra job cuts, exceeding the scale of a restructuring agreed less than two years ago.
The job cuts would add to 50,000 that are currently planned for the whole group, underscoring the growing pressure on Blume to deliver more fundamental change at Europe's biggest automaker by sales, whose shares are trading near 16-year lows.
Union Resistance and Historical Context
'INEVITABLE DECLINE'
The 2024 Volkswagen restructuring — which included cutting 35,000 jobs by 2030 — was considered a victory for powerful unions, given it excluded factory closures and compulsory layoffs until the end of the decade.
Blume is also under mounting pressure from Volkswagen's largest investor Porsche SE, bruised by tens of billions of euros of writedowns on its core investment, to overhaul the group's business model, saying cost cuts alone are not enough.
His challenge reflects long-standing difficulties in implementing structural change without the support of unions, who hold no equity but wield significant influence on strategic matters via the supervisory board.
It was labour opposition that ultimately sealed the fate of Blume's predecessors Herbert Diess in 2022 as well as Bernd Pischetsrieder in 2006.
Shareholder and Analyst Perspectives
"Blume is simply the one who's in charge now, so it's fair to hold him accountable for the strategies he proposes and whether they're effective," said Marc Liebscher of SdK, an association representing smaller Volkswagen shareholders.
"Cost cuts are not a strategy... They're just delaying the inevitable decline."
Competitive Pressures: Germany vs. China
GERMANY IN THE SLOW LANE VERSUS FAST, CHEAP CHINA
Blume, CEO since September 2022, has a reputation as a consensus-seeker who has been able to balance all of Volkswagen's stakeholders, who, apart from the Porsche and Piech families and unions, include Qatar and the German state of Lower Saxony.
His task this time is complicated by the unexpected departure last month of shareholder representative Susanne Wiegand from Volkswagen's supervisory board, leaving labour representatives with 10 of the board's 19 seats.
This effectively robs Chairman Hans Dieter Poetsch of his power to cast a decisive vote, which he can only do in case of a stalemate between the shareholder and labour representatives on the board.
Challenges of German Production
"Without the labour union, you can't take any action," said German automotive industry analyst Ferdinand Dudenhoeffer, who said Volkswagen's issue was one of more expensive German production battling cheaper and faster plants in China.
"VW has to be reformed, but the biggest problem of VW is Germany. This is a pretty serious problem and the question is whether the future of VW lies in Wolfsburg or Anhui (province in China)," he said.
Future Leadership and Shareholder Sentiment
Hendrik Schmidt of DWS, among the biggest 10 shareholders, called for a more critical look at VW's array of brands and said Blume was being bogged down fighting crises rather than shaping the company's future.
However, he said the shareholding families still felt a change of leadership would only cause further unrest.
"So whilst they may be watching the way forward with gritted teeth, they are also aware that there are no immediate alternatives at this stage," he said.
(Reporting by Nick Carey, Rachel More and Christina Amann; Writing by Christoph Steitz; Editing by Adam Jourdan and Emelia Sithole-Matarise)
