Volkswagen To Cut Its Spending For The First Time Since 2009 Financial Crisis

Volkswagen is slated to announce its first slash in capital spending since the financial crisis of 2009. It shows the way the emissions cheating scandal by the German car maker has weakened the positions of its labour unions.

Volkswagen’s supervisory board shall approve the cuts on Friday, sources have been cited. The company is preparing for a multi-billion Euro bill for cleaning up its largest business crisis.

Analysts on the whole expect VW to reduce annual spending on models, equipment and factories by 10 percent, from $18.4 billion that was announced last year. The figure was almost twice the 8.6 billion one for the period 2010-2012. Labour unions have wielded a larger influence on Volkswagen that other companies, since the 1930s when the Nazi regime made use of expropriated union funds for building the huge plant at Wolfsburg, its home town.

However, the company’s admission of cheating US diesel emissions tests has set off a crisis that is allowing the ruling Piech Porsche can for strengthen its grip. With a new CEO and chairman in place who are loyal to the company, analysts believe the shift in power is underway and it could weaken the union’s positions and their allies in the local government who have often put jobs and investment before profits.

According to Arndt Elinghorst of Evercore ISI, a banking advisory firm, the way Volkswagen has worked in the last twenty years, does not click anymore. The banking advisory firm has placed a “buy” rating against VW shares, expecting the crisis to become a turning point in productivity. With Volkswagen’s back against the wall, its management shall be making the decisions, rather than the workers council.

The fact that the management is gaining leverage was observed in their last supervisory board meeting.

Bernd Osterloh, the chief of works council, who leads around nine labour representatives on the twenty-strong board, has launched a criticism against Herbert Diess, VW branch chief for cutting costs without a word with workers.


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