VW, Labor Struggle to Reach Accord

Volkswagen AG and its works council appear stalled over negotiations to cut costs in Germany, Reuters reports.

The two side had appeared close to an agreement. But an internal works council letter warns that the prospects of a pact could collapse because of a lack of “essential commitments” from the company.

VW Group was pushing to lower costs and improve its acknowledged inefficiencies even before its diesel emission cheating scandal began a year ago. The mounting costs of resolving the crisis are intensifying the effort.

VW’s namesake brand unit aims to reduce its annual costs by €3.7 billion ($4 billion) through 2021 with a scheme that would include using attrition to eliminate thousands of the unit’s 114,000 jobs in Germany. The works council doesn’t necessarily object to a job reduction, but it wants the company to set specific goals for new products, production and plant investments.

Herbert Diess, who heads the VW brand, hopes to double the unit’s operating margin to 4% by 2020. Reuters notes that the target is below the unit’s original 6% goal and short of profitability benchmarks at Ford, General Motors, PSA and Renault.