Volkswagen Shares Soar 7% on Turnaround Agreement and Major Restructuring Plan
Volkswagen's Major Restructuring: Details and Market Impact
By Christoph Steitz
Shares Surge After Supervisory Board Agreement
FRANKFURT, Sept 4 (Reuters) - Shares in Volkswagen were up 7% in early trade in Frankfurt after the supervisory board of Europe's largest automaker late on Thursday struck a major turnaround agreement that averted an escalation with unions and shareholder Lower Saxony.
Key Elements of the Restructuring Plan
Job Cuts and Plant Uncertainty
The deal on the biggest restructuring in the group's 89-year history includes a further 50,000 job cuts, bringing the group's total to 100,000, and leaves open the future of four of its German plants.
Supervisory Board Dynamics
Management, outnumbered by unions and Lower Saxony on the supervisory board, had considered calling a shareholder meeting to push through its demand, which would have been an unprecedented escalation of stakeholder conflict at the carmaker.
Stakeholder Reactions
Shareholder Perspective
"The agreement ... is a positive sign for Volkswagen and the capital market – even if it involves severe cutbacks amongst the workforce and within the group," said Moritz Kronenberger of Volkswagen shareholder Union Investment.
Executive Board's Next Steps
"The ball is now entirely in the Executive Board's court. There are no more excuses," he said.
Challenges Facing Volkswagen
The turnaround prospects come as Volkswagen faces pressure from U.S. import tariffs, a stagnant European market as well as aggressive Chinese rivals that have all gnawed at the group's operating margin, which stood at a mere 3.8% in the first half.
(Editing by Ludwig Burger)
