Volkswagen faces struggle to cut costs by £3.3 billion

Workers and VW management haggle over cuts needed to cover Dieselgate expenses and future investment

Volkswagen is facing a struggle to push through £3.3 billion cost cutting measures.

The German group is locked in a haggle with workers over plans to cut 3.7 billion euros from the Volkswagen brand’s future spending, according to Reuters. The company faces huge bills in compensation and fines relating to the Dieselgate emission scandal that broke in 2015, and it also needs to invest in future electric and autonomous vehicle production. Most of the planned cuts will take place in Germany.

But workers representatives at Europe’s biggest manufacturer say they won’t back the plan – known as the “future pact” - without commitments from senior VW figures to fixed targets, quotes and product output. Works council members hold almost half the seats on the VW group’s supervisory board, and in a letter to staff on Thursday they said that “a collapse of the future pact continues to be possible because we are still lacking essential commitments from the company”.

Herbert Diess, chairman of the Volkswagen brand’s management board, is behind the future pact, but he was booed and interrupted as he addressed some 20,000 workers at VW’s Wolfsburg headquarters. The former BMW man, who was instrumental in that company’s past cost-cutting measures, wants to shrink the workforce but has promised that there will be no compulsory redundancies within the group’s 200,000-strong Volkswagen division.

A participant at the meeting told Reuters that Diess wanted to extend the working week for R&D engineers to 40 hours from 35. Labour bosses oppose anything that would change wage contracts, but VW believes it can implement such a move without altering contracts, according to a company source.

The future pact is due to be completed by management and the works council before a meeting of the supervisory board on 18 November, which will ratify future spending targets.

But labour bosses said in their letter: “At the moment we are still quite a bit away from an agreement with the company.”

Phill Tromans