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Cost-cutting at VW

March 7, 2016

Wolfgang Porsche, the most powerful interlocutor of the Porsche-Piëch family, which owns a majority of Volkswagen shares, has said talking about layoffs at Europe's largest automaker should no longer be taboo.

VW Kleinwagen Wolfsburg
Image: dapd

Porsche's words were welcomed by the head of the company's works council, Bernd Osterloh, who saw them as a departure from the board's earlier "policy of speechlessness" over its decision to cut VW's overhead costs by 1 billion euros ($1.1 billion) a year in the wake of its emissions scandal.

"If we determine, for example, that we have an excess of personnel in individual areas, we must be able to consider constructive solutions early on," Porsche said in an interview with the German news agency DPA on the sidelines of the Geneva Motor Show.

"This would help us to avoid having to lay people off from one day to the next," he added.

Porsche is chairman of the family-owned holding company Porsche Automobile Holding SE, which owns a majority of VW's shares.

Unanswered questions

As Volkswagen untangles itself from its largest-ever crisis, one enduring question has been how high the combined expenses of fines, vehicle refits and lawsuits could ultimately be.

Late last year, Osterloh sharply criticized VW's board members, led by Porsche, for not being sufficiently forthcoming about planned savings measures, the scope of which VW's new CEO, Matthias Müller, announced in October.

VW’s new modesty

That row culminated in a letter sent by Osterloh to senior company executives, urging them to immediately start talks with VW's works council, a body that represents the interests of employees.

"The entire supervisory board, and not only the workers' representatives, needs to concern itself more with the personnel situation," Osterloh also told DPA, in response to Porsche's interview. "At the moment, this isn't happening enough."

On Monday, Porsche left no room for doubt that some layoffs are looming. "Surely, we're going to have to streamline our operations in one area or another," he said.

Damage control

An employees meeting is scheduled for Tuesday, at which VW's brand manager Herbert Diess is expected to present details of the company's plans for cutting investment at its biggest division by 1 billion euros.

Damage control is in full gear at VW as the automaker prepares to fend off lawsuits on several fronts. In Germany, shareholders are suing, alleging the company was too slow to inform the public about investigations into its diesel engines.

The question of who at Volkswagen knew what and when has been a matter of intense scrutiny since the company came clean about installing cheating software on Sept. 18 of last year, after which its stock price tanked.

Now lawyers from both sides are facing off over whether VW should have told its shareholders sooner that its stock price was at risk.

Missed memos

Two German newspapers reported over the weekend and on Monday that Müller and the company's new executive board chairman, Hans Dieter Pötsch, VW's former chief financial officer, had been informed about the use of illegal emissions-control software as early as Sept. 8 - two weeks before the scandal came to light.

Both papers, the widely-read tabloid "Bild" and the center-left daily "Süddeutsche Zeitung," cited a 120-page position paper submitted to a regional court in Braunschweig, Germany, that VW drew up to counter the damage claims.

According to VW, Martin Winterkorn, the company's former CEO who resigned shortly after the emissions scandal broke, overlooked two memos in 2014 that would have warned him about discrepancies found in diesel emissions in the United States.

cjc/uhe (dpa, Reuters, AFP)