Union Labor

At Volkswagen, Worker Opposition Mounts to Rumored Takeover of Italy's Fiat

  • Why it matters

    Why it matters

    Bernd Osterloh is one of Germany’s most powerful union leaders. He has headed VW’s works council since 2005. The company recently announced that it was seeking to cut costs by €5 billion a year up to 2017.

  • Facts

    Facts

    • Volkswagen is looking to cut costs by €5 billion a year up to 2017.
    • Bernd Osterloh is the company’s top labor representative and a member of the supervisory board.
    • The labor union has to approve any major policies taken at the company.
  • Audio

    Audio

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Betriebsversammlung VW
Workers at Volkswagen headquarters in Wolfgsburg listen to the chief executive, Martin Winterkorn, during a July 23 meeting. Source: DPA

 

Bernd Osterloh is one of Germany’s most powerful union leaders. He has headed Volkswagen’s works council since 2005. He is also part of the VW supervisory board’s steering committee and was recently appointed to the VW Group’s group of directors in the United States. He spoke to Die Zeit about how the company is striving for greater efficiency while avoiding job cuts.

Die Zeit: Mr. Osterloh, Volkswagen is rushing from one success to the next. In the last fiscal year, the company earned more than €11 billion ($14.8 billion) in profits, and VW could produce more than 10 million vehicles for the first time in 2014. Nevertheless, there have suddenly been rumblings at VW. There are rumors you plan to take over Fiat, and CEO Martin Winterkorn aims to cut costs by €5 billion a year by 2017. What’s going on at VW?

Bernd Osterloh: Internally, we’re discussing how to become more efficient. In public, however, there is constant talk of cost-cutting, which irritates me. Let me clear something up: It isn’t about saving money, but about using it more intelligently. There’s a huge difference.

Can you be more specific?

VW is in a good position. Our products are selling very well and our plants are busier than ever. This stands in sharp contrast to the 1990s, when we introduced concepts like the four-day work week to preserve jobs. That’s not the issue today. In fact, we have too much work in plants like Braunschweig and Wolfsburg, which sometimes means customers have to wait longer for their vehicles. If you order a Golf Variant today, you might get it in February 2015. We’re in a good position when it comes to volume, quality and our goal of being a top employer. But we have a way to go on efficiency.

Your boss, Martin Winterkorn, said last week that it’s time “to take steps that are clear, effective and sometimes painful.” That sounds like layoffs.

Dr. Winterkorn said himself that he at least wants to keep jobs at the current level in Germany. In that sense, there is zero talk of cutting jobs. Our goal is to reduce complexity, especially when the customer doesn’t see it. The VW Group has a dozen brands and produces more than 300 different models. We have to take a look, for example, at how many different drive shafts we have, at how many body construction requirements, mirrors or substructures for the control panel. And then think about how many of them we really need. Our logistics volume has more than doubled in the last 10 years. If we manage to reduce complexity, cutting spending by €5 billion won’t be a problem.

But then what will be so painful for you?

It certainly hurts when you’re a pioneer for innovation and then have to remove technically complex components from the product, especially those that offer no palpable benefit for the customer. But it’s ultimately the customer who decides what he wants from Volkswagen, not the board.

For years, your company has been toying with the introduction of the Modular Transverse Toolkit (MQB), a technical scaffold of standard components, in which the axles, engine and transmission are designed to fit into several dozen models of different brands. But the work on MQB has eaten up more money than planned. According to Manager Magazin, the new Passat on an MQB platform is supposed to yield only a 2-percent rate of return. Did VW bet on the wrong horse?

That number is wrong. The costs are not being generated by the toolkit itself, but by the fact that it’s running in parallel with the precursor technology. The MQB does lead to standardization and lower costs of development, planning, production, etc. The faster the toolkit arrives, the better.

“We have to step on the gas, but not at the expense of employees. We are not cutting jobs here in Germany.”

Bernd Osterloh, VW union leader

Your core brand, Volkswagen, generated only a 2.9-percent return on sales in the last fiscal year, and only 1.8 percent in the first quarter. The numbers are much better at Audi and Porsche. Is Germany even the optimal location for the mass production of mid-size vehicles anymore?

Let’s turn that question around: How high are other competitors’ returns? What are they making with their volume models? Margins just aren’t that high in this segment, which is perfectly normal. The bigger the car, the bigger the profit per vehicle. Still, we make plenty of money with models like the Golf and the Tiguan, which are produced here in Germany. Volkswagen is proof that you can produce competitively in Germany, with good wages. But we still have to be a little more innovative and productive than others. We have to step on the gas, but not at the expense of employees. We are not cutting jobs here in Germany. It isn’t the employees’ fault that productivity isn’t growing as planned. Management is to blame, because of poor planning at production plants, for example.

 

Bernd Osterloh VW union dpa
Bernd Osterloh, the VW union boss, said workers are concerned that a takeover of Italy’s Fiat could lead to job losses in Germany. Source: DPA

 

Your supervisory board chairman, Ferdinand Piech, is in talks over a Fiat takeover – even though the Italians are in crisis. What would this alliance do for Volkswagen? The group is obviously already very complex today. Do you have your eye on Fiat subsidiary Chrysler, because your own US business is so weak?

I think that rumor is a joke. The labor side of the supervisory board isn’t about to approve an acquisition of any other brands at the moment. We want to solve our own internal problems first.

The Internet is becoming increasingly important when it comes to car production, and new competitors are pushing into your market. Google, for example, developed a prototype for a self-driving car months ago, and it recently hired former Ford CEO Alan Mulally. What does this mean for VW?

We take this very seriously. Technological possibilities and customers’ standards are changing rapidly. We want to shape this business ourselves and not leave it to others. That’s why we just acquired Blackberry’s European research and development center in Bochum, with roughly 200 employees. Cars will be heavily networked in the future. And we sell the most cars in Europe – optimal conditions for our customers to benefit from networking.

What could the brave new Internet world look like behind the wheel?

Here’s a simple example: You’re driving on the street, a sensor determines that the temperature is dropping, and other vehicles a few kilometers down the road are transmitting data to indicate that it’s already snowing there. Suddenly an ad appears on your driver’s display: “Special on winter tires at your VW dealer, 500 meters up the road and on the right.” It isn’t just the customer but also Volkswagen that stands to benefit.

Interview conducted by Claus Hecking and translated by Christopher Sultan

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