Market Analysis

Volkswagen (ETR) is set to face a tense and apprehensive workforce at a crucial meeting at its Wolfsburg headquarters on Wednesday, where it will outline plans for significant cost-cutting measures. These include potential factory closures in Germany as part of its strategy to achieve an ambitious profit target for its main brand.

Chief Financial Officer Arno Antlitz and VW brand head Thomas Schaefer will present the automaker's plans, while Daniela Cavallo, head of the works council and elected by employees, is expected to strongly oppose these measures. Cavallo has warned that the meeting, expected to last several hours, will be highly charged, with management facing substantial resistance.

Volkswagen announced on Monday that it might close factories in Germany and end a long-standing job guarantee at six of its plants as part of a €10 billion ($11.04 billion) cost-cutting initiative. The company aims to achieve a 6.5% profit margin by 2026, up from just 2.3% in the first half of this year.

In October, Volkswagen and the unions will negotiate over wage increases, but labor representatives, including Thomas Knabel from the IG Metall union at Volkswagen's Zwickau plant, are pushing for an earlier and broader discussion about the company's plans. The union, a powerful labor group with representation on Volkswagen's supervisory board, insists that negotiations cannot begin until the threat of plant closures is removed.

Volkswagen attributes its financial difficulties to a challenging economic environment and increasing competition. However, labor representatives argue that the company's production strategy is flawed and that management has been slow to invest in mass-market electric vehicles.

Given the size and complexity of Volkswagen, the company faces a tough task in implementing cost reductions quickly, according to investors and analysts. Jefferies analyst Philippe Houchois noted that while management and unions typically find common ground in tough times, the process is unlikely to be smooth.

Paraphrasing text from "Reuters" all rights reserved by the original author.