Volkswagen (VW), Europe’s biggest carmaker, gave a warning recently to its 100 000 German employees that they would have to accept thousands of job losses and several plant closures if the group was to survive.
Linking his own future to that of the company, the chief executive Bernd Pischetsrieder and his fellow directors bluntly told staff that VW was doomed unless it carried out a multibillion-euro cost-cutting programme and doubled its earnings within three years.
Pischetsrieder has been locked in a power struggle with VW’s supervisory board, chaired by Ferdinand Piech. Mr Piech is trying to get rid of the chief executive and has won the support of the unions, which are enraged by plans to axe up to 20 000 jobs and close or sell off several German component plants.
The VW chief intends to fight Piech’s plans to unseat him, with the support of his management team. ”We will not allow any wedges to be driven between us,” he said.
Company insiders admit that the boardroom struggle has damaged VW and concede that Piech, himself a former chief executive, has no intention of backing off.
VW’s operating earnings rose 70% last year to â,¬2,8-billion, thanks to a â,¬3,5-billion cost-cutting plan known as ForMotion. But Hans Dieter Poetsch, chief financial officer, said the core Volkswagen brand had only just broken even and the division, which includes Bentley and Skoda, needed radical surgery.
The group, which lost â,¬843-million in North America and â,¬88-million in Asia, achieved a net profit margin in 2005 of 2,6%, far short of the target of 9%. Pischetsrieder said he expected a ”slight” increase in sales and earnings this year, thanks to a partial recovery in China and the United States. — Â