German Chancellor Olaf Scholz called on car manufacturer Volkswagen AG not to shut down factories, Funke media group reported, even as the leader acknowledged it was up to the company’s owners and labor representatives to discuss the matter.
Closing locations “would not be the right way” because poor management decisions contributed to the difficult situation, he told Funke media group in an interview published on Saturday.
Scholz, of the Social Democratic Party, said that while it was the owners who negotiated the specific decisions together with the social partners, it is “always right to remind companies of their responsibility.”
Photo: REUTERS
His comments come ahead of a second wave of so-called warning strikes of Volkswagen workers across German plants planned for today. They are designed to pressure executives during deadlocked negotiations over how to slash costs.
Volkswagen is pushing for unprecedented factory closures, thousands of layoffs and 10 percent wage cuts at its flagship marque, which is struggling with poor demand in Europe and waning relevance in China, the world’s largest auto market.
The industry “faces an almost perfect storm,” UBS Group AG analysts led by Patrick Hummel said in a note to clients.
“Pricing pressure, market-share losses in China, tighter CO2 regulation, tariff risk and continued lackluster demand will likely drive sector earnings down further, despite intensifying restructuring efforts,” they added.
A key employer across Europe, the automotive industry has been the worst-performing sector so far this year. Even with company valuations some 30 percent below historical averages, investors are cautious as the timing for a broader and sustained market rebound remains uncertain.
“For as long as the end of the downgrade cycle isn’t visible, any potential bounce from current lows will likely be short-lived,” UBS said.
Volkswagen would reconvene today for another round of negotiations with its powerful labor union IG Metall about cuts to its beleaguered namesake brand. Management has said it needs to close factories in Germany to address a drop in electric vehicle demand, rising operational costs and intensifying competition. Executives last week rejected labor’s counter-proposal — a 1.5 billion euro (US$1.6 billion) package of additional cuts that included lower dividend payouts, reduced bonuses and a fund to pay for possible layoffs and shift reductions.
With the two sides still far apart, more walkouts and protests could follow in coming weeks in the run-up to the Christmas season. Daniela Cavallo, Volkswagen’s top labor representative, said the meeting today “is likely to determine the way forward: compromise or escalation.”
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