April 11, 2018 / 7:42 PM / 3 months ago

Volkswagen to give workers a management seat to try to unlock reforms

BERLIN/HAMBURG (Reuters) - Volkswagen (VOWG_p.DE) will give workers a management board seat to try to secure agreement for a far-reaching reform of the company under a new chief executive, sources familiar with the matter said on Wednesday.

FILE PHOTO: A Volkswagen logo is pictured at Volkswagen's headquarters in Wolfsburg, Germany, April 22, 2016. REUTERS/Hannibal Hanschke/File Photo

Europe’s biggest automaker has, particularly since its 2015 emissions scandal, been looking to become more focused and efficient by, for example, spinning off its trucks business, creating a premium cars unit or selling motorcycle brand Ducati.

But CEO Matthias Mueller’s attempts at reform have often been thwarted by turf wars among the German company’s stakeholders and opposition from its labor leaders.

Two sources familiar with the matter said on Tuesday that Volkswagen’s supervisory board was poised to replace Mueller, a 64-year-old company veteran, with Herbert Diess, the 59-year-old head of its core VW brand. Diess joined from BMW (BMWG.DE) in 2015 with a reputation for driving change.

On Wednesday four sources close to the company told Reuters that the supervisory board would seek to bring works council executive Gunnar Kilian onto the company’s management board to try to secure backing for Diess and his plans.

Kilian, who works directly under labor boss Bernd Osterloh, will replace personnel chief Karlheinz Blessing, the sources said, giving workers representatives a direct say on strategy and cost-cutting.

Volkswagen and the works council declined to comment.

The supervisory board meeting to approve a new leadership structure will now be held Thursday instead of Friday, one source told Reuters.

Volkswagen could look to split into four sections - a mass-market carmaker including its VW, Seat and Skoda brands; a premium business consisting of Bentley and Audi (NSUG.DE); a sportscar group including Porsche, Bugatti and Lamborghini; and a commercial vehicle and trucks arm, the sources said.

The potential restructuring was first reported by German magazine Der Spiegel.

Such an overhaul would be part of a wider auto industry trend toward spin-offs as companies aim to become more nimble and efficient to cope with rapid changes such as the rise of electric vehicles and autonomous driving.

German rival Daimler (DAIGn.DE), is looking at splitting parts of its business into separate entities, while autos supplier Continental (CONG.DE) is weighing up a revamp that could entail listing or spinning off divisions.

Thursday’s supervisory board meeting is also expected to start preparations for a stock market listing of the trucks and bus division, sources have said.

A separately listed trucks and bus business could have a market value of up to 30 billion euros ($37 billion), Evercore ISI analysts have said. That compares with Volkswagen’s current market capitalization of about 85 billion euros.

SWEEPING MANDATE

“Diess will hold both positions, CEO of the company and the VW brand,” one of the sources said, speaking on condition of anonymity because of the sensitivity of the subject.

That would give him a sweeping mandate to review broader changes to the way the group is managed.

However, Union Investment fund manager Ingo Speich, whose firm holds about 0.6 percent of Volkswagen preference shares, expressed concern that running a group with about 640,000 employees at more than 120 plants worldwide could prove tough for Diess, who has a reputation for micro-management.

“The range of tasks at group level, with its many brands, legal risks and political influence, makes the new assignment incomparably more complex,” Speich said, adding that there is no guarantee reforms would become easier to push through.

“The unions will try to firm up their power with the new leadership structure,” he said.

Volkswagen shares, which closed 4.5 percent up on Tuesday after reports of Diess’s likely appointment, gained 0.9 percent on Wednesday to 173.16 euros.

Reporting by Andreas Cremer, Jan Schwartz, Irene Preisinger and Ilona Wissenbach; Writing by Edward Taylor; Editing by Keith Weir, Mark Potter and David Goodman

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