January 29, 2015 / 2:03 PM / 4 years ago

Volkswagen brand should beat five billion euro cost-cutting goal: labor chief

WOLFSBURG, Germany (Reuters) - Volkswagen (VOWG_p.DE) should be able to cut costs at its troubled passenger car brand by “substantially more” than the 5 billion euros ($5.7 billion) planned by the German carmaker’s top management, its works council chief said.

The Volkswagen logo is pictured at the booth of German carmaker Volkswagen at the IAA truck show in Hanover, September 23, 2014. REUTERS/Fabian Bimmer

“With a bit more discipline one would easily be able to generate more efficiencies,” Bernd Osterloh, Volkswagen’s (VW) top labor representative, told reporters on Thursday at the carmaker’s base in Wolfsburg, Germany.

Across the multi-brand group, the potential for savings is even bigger, he said, without elaborating.

Europe’s largest automaker announced plans in July to cut 5 billion euros of costs at its core VW division by 2017 to close a profitability gap with rivals such as Toyota (7203.T).

Yet the division is working on a new version of its loss-making Phaeton saloon, which some analysts say contradicts the savings drive.

Osterloh urged management to tackle the costly proliferation of models and parts at the VW brand to raise the division’s profit margin to a target of at least 6 percent by 2018 from less than 3 percent.

“I don’t know why we need to have twelve different radiator grills for the Tiguan” compact SUV, he said.

Separately, Osterloh, who also sits on VW’s 20-member supervisory board, said the group’s new trucks chief, Andreas Renschler, had to gauge the need for possible acquisitions as he works to integrate VW’s different truck units including Germany’s MAN SE and Swedish manufacturer Scania.

“With western Europe and Brazil only, this will be no success story,” he said of the trucks business which Renschler, a former Daimler executive, will join on Feb. 1.

VW is planning to create a separate holding company to better integrate MAN SE and Scania, Osterloh said.

“We believe the whole matter of synergies at MAN and Scania should be pursued more strongly,” he said.

But efforts by Renschler to locate such a holding company in Frankfurt, as reported last week by Germany’s Manager Magazin, appear to be doomed.

“That’s not where our customers are based,” VW Chairman Ferdinand Piech told reporters in Stuttgart on Thursday.

On Russia, Osterloh said VW last year lost a three-digit million-euro amount due to the plunge of the rouble which has been hammered by the slump in oil prices and Western sanctions imposed over Russia’s involvement in Ukraine.

Editing by Jonathan Gould and Mark Potter

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