Cost-cutting deal with unions key to VW's recovery

Fri Sep 16, 2016 7:05am EDT
 
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By Andreas Cremer

BERLIN (Reuters) - Volkswagen's (VOWG_p.DE: Quote) ability to agree a big cost-cutting plan with its powerful labor unions in the coming weeks could determine whether the German carmaker's shares make a full recovery from its emissions scandal.

A year after it admitted using illegal software to rig diesel emissions tests, Volkswagen (VW) has still to publish the results of an investigation into who was responsible.

But it has reached a $15 billion settlement with U.S. authorities and worked out a way to refit up to 11 million affected vehicles worldwide, helping its stock to recover almost half of the losses suffered immediately after the scandal broke.

Analysts and investors say key to a further recovery will be the company's ability to tackle a problem that pre-dates the scandal, but which has become more urgent because of it: the high cost base of its German factories.

At a meeting with workers at its Wolfsburg headquarters on Wednesday, executives said they were hopeful of reaching a deal with unions over jobs and investments in the coming weeks.

As an example of the progress being made, one participant said bosses had offered to assign production of two electric cars to German factories currently making combustion engines and related parts, which might suffer from a push for greener cars.

In return, unions voiced openness to greater outsourcing of parts production, a second participant said.

"The latest comments are giving me hope that both sides have got the message," said a fund manager who holds a small stake in VW and declined to be identified. "VW could reap significant earnings potential from a deal but a lot is at stake for both sides and there is always room for disappointment."   Continued...

 
The logo of a Volkswagen Beetle car is seen at the "Sunshinetour 2016" in Travemuende at the Baltic Sea, August 20, 2016.  REUTERS/Fabian Bimmer/File Photo