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VW Restructuring Talks Produce Union Win, But Share Price Unfazed
By Neil Winton, Senior Contributor
For the second time in as many years, Volkswagen’s (VW) restructuring efforts have ended in a decisive victory for its labor unions. The company’s latest attempts to restructure its operations and improve profitability were met with stiff resistance from union officials, resulting in a deal that fails to address the very issues VW aimed to solve.
In a bold move, VW agreed not to close any factories or initiate layoffs, instead opting for early retirement incentives and natural attrition to achieve the desired reductions. The company’s plan to reduce production capacity by 734,000 units also seems to prioritize compacting plants over shutting them down, leaving many wondering if this approach will be effective in cutting costs.
Despite these concessions, VW’s share price has remained unimpressed, closing at €91.30 on Friday. Investors are left wanting more details on the company’s plan to achieve its ambitious cost reduction targets of €15 billion ($15.6 billion) by 2026.
Jefferies, an investment researcher, expressed skepticism over the deal, stating that it “requires more details” and falls short of VW’s commitment to shutting down factories and reducing workforce numbers. Bernstein Research concurred, saying that the agreement misses management’s goal of reducing wage levels between 16-19%, instead only aiming for a 4-7% reduction.
Automotive industry lecturer Frank Schwope believes that from an employee perspective, the agreement can be viewed as a success, even if the details are not yet fully understood. The deal may also have prevented potentially crippling strikes in January, Jefferies pointed out.
While it is unclear what will happen next, one thing is certain – this latest restructuring effort has been met with significant resistance from the labor unions. It remains to be seen whether VW can now successfully implement its plans and improve profitability without sacrificing job security or compromising production capacity.
As a result of the agreement, VW’s employees have secured job security until 2030, and at least 10 German factories will continue to operate. However, the lack of concrete details on cost savings has left investors feeling uncertain about the company’s ability to achieve its goals.
Only time will tell if this latest attempt at restructuring can bring about meaningful change and improve VW’s financial performance.
Source: www.forbes.com
