Report – Volkswagen cost cutting program fought by unions image

Volkswagen’s union leaders have forced the company to let McKinsey go, the consultants that were involved with the plans to cut costs by 5 billion euros ($6.68 billion), according to people that have knowledge of the situation.

The three sources say the overall plan to achieve the designated cost-savings remains unchanged, but the move signals deeper than thought dissensions between management and employees at the German automaker. VW AG, now the second largest automaker in the world, has been struggling to increase earnings at its core VW nameplate as the home region is still recovering from the economic crisis and emerging markets show signs of weakness.

“We know too well what the priorities of McKinsey are: They’re preoccupied with cutting the headcount in production,” said one of the people.

According to the sources, VW management tasked McKinsey to oversee the implementation of the 5 billion euros worth of efficiency gains plan. The problem for the union leaders was that the consultants were brought in without first asking the staff representatives. The very powerful works council soon decided the move was against the praised spirit of co-determination between management and labor. The plans for the cost-cutting measures were not very advanced, so the move will not set back too much the overall target – set for 2017.

Via Reuters