The Business Times

VW CEO gears up for labour fight with overhaul on the line

Published Mon, Mar 11, 2019 · 09:50 PM


VOLKSWAGEN AG is facing crunch time to deliver on a pledge to become a global juggernaut shaping future transportation.

Nearly a year into his reign, chief executive officer Herbert Diess has stepped up crucial parts of an overhaul of VW's 12-brand global empire to gain speed and efficiency and fight new and old rivals. He's trying to push through a partial share sale in VW's trucks division and other structural changes.

His next opportunity to press his case comes this week, when the world's largest carmaker presents annual earnings, and the former BMW AG executive has his first official large-scale meeting with analysts and investors since becoming CEO in April. VW already presented preliminary earnings in February that met expectations and forecast a rise in revenue this year despite challenging conditions.

It's fitting the event coincides with the Ides of March, the date in the Roman calendar that's become imbued with an ominous sense of downfall since the assassination of Julius Caesar. Mr Diess, known for hard-as-nails tactics and a healthy appetite for a fight, risks losing momentum if he can't keep in check rising tensions with VW's powerful works council.

While Mr Diess has the backing of Wolfgang Porsche, a leader of the Porsche and Piech owner family, worker representatives hold half of VW's supervisory board seats. They often vote as a block with the state of Lower Saxony, which holds a 20 per cent stake. Together they can easily block deeper cutbacks among VW's high-cost German workforce, and have resisted structural changes like selling non-core assets such as the Ducati motorcycle brand.

With VW's namesake brand and Audi, its biggest profit centre, continuing to trail competitors in profitability, Mr Porsche last week slammed VW's "fossilised structures" and the strong sway of unions standing in the way of progress.

VW's top labour representative, Bernd Osterloh, wasted no time turning the lens back on management failures, citing the mishandling of new emission tests in Europe that cost the company about one billion euros (S$1.53 billion). And then there's the diesel-emissions cheating crisis that's so far cost VW 28 billion euros.

"All of these are management issues, which have nothing to do with the workforce," Mr Osterloh said in a statement. "This has cost the owners several billions already, and that's what the supervisory board should focus on." BLOOMBERG

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