Volkswagen to give more power to brands, regions

Thu Dec 4, 2014 3:50am EST
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By Jan Schwartz and Andreas Cremer

WOLFSBURG, Germany (Reuters) - Volkswagen (VOWG_p.DE: Quote) will hand more power to brand managers and regional bosses, its labor leader told Reuters, as Europe's biggest carmaker looks to address underperformance in markets such as the United States and Brazil.

Bernd Osterloh, head of the German group's works council, also said in an interview he expected Chief Executive Martin Winterkorn to extend his contract by two years to 2018.

Volkswagen (VW) has expanded rapidly since Winterkorn took the helm in 2007, with profit almost doubling to 11.7 billion euros ($14.4 billion) in 2013, and aims to overtake Toyota (7203.T: Quote) as the world's biggest automaker no later than 2018.

But that goal is under threat from pockets of underperformance, such as the United States where sales of the core VW passenger car brand are down 11 percent this year.

The company has announced plans to cut 5 billion euros of costs at the VW brand in a bid to improve profitability, and now intends to give more power to brand and regional business leaders to better address local markets.

"I think a company of this size cannot steer everything from Wolfsburg," Osterloh said at the group's headquarters in the German town. "Our approach is: centralize as much as necessary and decentralize as much as possible."

The VW group, whose brands range from the upmarket Audi and Porsche to the cheaper Seat and Skoda, has 108 factories worldwide and makes annual sales of nearly 200 billion euros -- about the size of Israel's gross domestic product.

In the United States, it is setting up a planning center and is hiring about 200 engineers to monitor the world's No.2 car market more closely and revamp vehicles more quickly.   Continued...

Bernd Osterloh, head of VW's works council, poses for the media at a production line at the Volkswagen headquarters in Wolfsburg December 2, 2014. REUTERS/Fabian Bimmer