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VW back-pedals on some cost cutting demands, workers say
February 21, 2017 / 12:57 PM / in 8 months

VW back-pedals on some cost cutting demands, workers say

BERLIN (Reuters) - Volkswagen (VOWG_p.DE) has rowed back on some demands for larger cost cuts than previously agreed with unions at its core VW brand, the works council said on Tuesday, as both sides seek to end a dispute over implementing a turnaround plan.

The logo of Volkswagen company is seen on a car on an assembly line at the Volkswagen car factory in Palmela, Portugal, December 9, 2016. REUTERS/Rafael Marchante

The carmaker’s labour bosses earlier this month halted cooperation with VW brand management on issues such as raising weekly hours for engineers and limiting apprenticeships after accusing executives of pushing for savings beyond those agreed in the brand’s so-called “future pact”.

But the works council said on Tuesday management had abandoned demands that a costly night shift be scrapped on the Golf hatchback’s assembly line and performance-based pay rules be tightened and had cancelled a hiring freeze.

“The works committee has asked management to return to the path towards the future pact,” a works council spokesman quoted labour chief Bernd Osterloh as saying at a staff gathering in Wolfsburg. “We have meanwhile received a letter from management that pledges that we will return to the contract status.”

A spokesman for VW confirmed the letter and said both sides had resolved their points of difference.

VW shares closed 1.4 percent higher on Tuesday at 144.15 euros.

Management and labour leaders agreed in November to cut 30,000 jobs at the VW division in exchange for a commitment to avoid compulsory redundancies in Germany until 2025, a deal that leaves profitability still lagging rivals such as PSA Group and Toyota.

But the turnaround plan won’t yield the quick savings wanted by brand chief Herbert Diess, who was known as a cost-cutter at BMW, and labour leaders have accused him of trying to cut temporary jobs more swiftly and deeply.

Diess on Tuesday reinforced his call for a swift implementation of the future pact, which he dubbed a “concrete and bold plan” to revive VW’s largest division by sales.

Despite weakening demand for core vehicle models such as the Golf and Passat, VW last year started making “first progress” in cutting fixed costs and raising productivity, Diess said.

“2017 will be a good but strenuous year,” he said.

However, a source close to VW’s works council said he doubted that the latest rapprochement with management would be sustained.

Osterloh, the top labour representative on the 20-strong VW supervisory board that appoints and dismisses executives, has clashed repeatedly with Diess over where to make savings ever since Diess joined VW in July 2015.

“It’s a matter of time as to how long the peace will last,” the source said.

Additional reporting by Jan Schwartz; Editing by Mark Potter, Greg Mahlich

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