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VW is in a state of turmoil, but the Piech and Porsche families receive €1 million per week

VW is in a state of turmoil. While management wants to force the closure of factories, layoffs and salary cuts, unions complain that the Piech and Porsche families receive €1 million per week.

Imagine a game of chess between the management of the Volkswagen Group and the works council. The former tried to resolve the serious problems the German consortium is facing by proposing the closure of at least three factories, the dismissal of 30,000 employees and a 10% reduction in salaries, to which the latter responded by going on strike in nine of the group's factories to force negotiations. After these initial exchanges of pieces, a meeting followed in Wolfsburg where everything went off the rails. At the German group's main factory (and headquarters), the management, represented by CEO Oliver Blume, and 20,000 workers and their unions were on both sides of the board, with the German Minister of Labor, Hubertus Heil, acting as the referee. 

Blume, who is a man appointed by the Porsche and Piech families, as have most CEOs — with the exception of Herbert Diess, who came from BMW when it was necessary to "clean up" the mess caused by the Dieselgate scandal — once again defended cuts and reductions, with the aim of increasing the group's competitiveness and profits, without which there is no investment. But Daniela Cavallo(image below), the head of VW's Works Council, argued that the cuts would curtail the group's production capacity, pointing the finger at the directors and main shareholders, namely the Porsche and Piech families with 31.4% (but with 53.3% of the voting rights), the State of Lower Saxony with 11.8% (20% of the votes) and the Qatar investment fund with 10.5% (17% of the votes).

And, to reinforce her message, Cavallo pulled an ace up her sleeve by recalling that the Porsche and Piech families, even in times of falling sales and reduced turnover and profits, continue to withdraw 1 million euros per week from the VW Group in the form of dividends. As if these guaranteed profits were not enough, come rain or shine, Cavallo recalled that this practice began in 2014 and, since then, has maintained a regularity similar to that of a Swiss watch.

Daniela Cavallo admitted that she intends to reach an agreement by Christmas, at the cost of commitments applicable to both sides. Otherwise, says the person responsible for the workers who stopped 100,000 this week, everyone will lose. 

Volkswagen, unions near deal, sources say...“We are getting closer,” a source familiar with the talks said. A second source close to the negotiations confirmed that assessment. Volkswagen is nearing a deal with labor leaders in Germany on wages and jobs, sources told Reuters on Friday (20). Europe’s largest automaker has been in talks with workers’ representatives since September on measures it says are needed to compete with cheaper Chinese rivals, weak demand in Europe and slower-than-expected adoption of electric cars. About 100,000 workers have staged two strikes in the past at the company’s German plants, the biggest union movement at the company in Volkswagen’s 87-year-old company. 

The automaker has plans to cut wages and close plants in the country to deal with the excess capacity it says it has. “We are getting closer,” a source familiar with the talks said. A second source close to the talks confirmed that assessment. VW workers are strongly opposed to the plant closures, but Volkswagen has said the move is necessary to save around 4 billion euros and respond to what it expects to be structurally weaker demand in Europe. VW’s structure is unique, with management having to get approval from a two-thirds majority of the 20-member board of directors for any decision to build or change the layout of a plant. That means 10 members representing German unions can veto any far-reaching plan that affects the group’s production facilities in the country. Any agreement with the unions requires approval from Volkswagen’s boards, which could complicate and delay a possible deal.

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