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VW's Winterkorn tells 20,000 staffers of big cost-cutting plans

During a gathering of 20,000 Volkswagen Group employees at company headquarters in Wolfsburg, Germany on Wednesday, CEO Martin Winterkorn dropped a bombshell. The boss stated that the automaker isn't operating efficiently enough and admitted the company needs to radically start cutting back to raise its profit margins. To right the ship, Winterkorn has proposed killing off less profitable models and spending less on research and development.
According to Reuters, Winterkorn wants to raise the VW brand's profit margin from about 2.9 percent in 2013 to a target of 6 percent. To make that possible, his plan amounts to increasing cost cutting until Volkswagen reaches about 5 billion euros ($6.7 billion) per year to get things back in order. "Over the short-term, we urgently need more efficiency and higher profit," the CEO said during his speech, according to Reuters.
However, Winterkorn can't make these decisions unilaterally. Volkswagen's works council also has a seat on the supervisory board to represent laborers, and it isn't likely to take the proposed cuts sitting down.

Volkswagen feuds with thriving stablemate Skoda

BERLIN, Oct 4 (Reuters) - Volkswagen managers and unions are seeking to curb competition from lower-cost stablemate Skoda, move some of its production to Germany and make the Czech brand pay more for shared technology, company sources told Reuters. As VW struggles to cut jobs and spending at German factories and turn the page on dieselgate, Skoda's superior car reviews and profitability have intensified the brands' rivalry within the Volkswagen empire. VW now wants to reduce what it sees as Skoda's unfair advantages - combining German technology with cheaper labor - and reaffirm the top-selling brand's primacy ahead of a wave of new electric car launches, the sources said. The tussle between VW and Skoda is reviving tensions at the heart of the Volkswagen group between profits and jobs, and between central control and autonomy for its 12 vehicle brands. "Instead of devoting our efforts to beating Tesla, we may just be setting up a futile internal conflict," said one manager. Once the butt of jokes, Skoda has blossomed under 26 years of VW group ownership into a successful mid-market carmaker, steadily winning business from rivals - including VW - and surpassing even Audi's operating profit margin last year. At the same time, VW is facing thousands of job cuts as management moves to trim excess capacity at German factories. Its powerful domestic unions see Skoda's success as both a threat and a potential lifeline. VW workers' representatives are now demanding the transfer of some Skoda production to their underused German plants, a source close to the supervisory board told Reuters. The proposal aims to offset declining output of the VW Passat and aging Golf that could otherwise threaten more jobs. They are also making the case that Skoda should pay higher royalties to use VW's main common vehicle platform. The so-called MQB architecture also underpins mid-sized models from the group's Audi and SEAT brands. Responding to the news, Czech Prime Minister Bohuslav Sobotka said he would meet Skoda management and unions to ask for clarification. The government will seek to ensure that VW investment plans are followed through and that "production is not moved outside the country," a statement released by Sobotka's office said. Skoda's main union warned that a production shift could cost as many as 2,000 jobs. VW's works council declined to comment.

Mercedes, Nissan and VW slammed by China's CCTV

Several automakers in China, including joint ventures with Nissan, Volkswagen and Mercedes-Benz, are in hot water because their dealers are allegedly overcharging customers for repairs. China Central Television, the country's state broadcaster, leveled the claims during its annual Consumer Day expose. CCTV runs these reports each year on March 15 and often takes aim at foreign companies operating within China. This year the focus fell on automakers, according to the Financial Times, and no domestic car companies were targeted. The network also accused dealers of overselling parts, and it took aim at Jaguar Land Rover specifically for problems surrounding transmission repairs, according to Reuters. The yearly stories are often criticized for focusing on outside businesses. "It panders to a certain type of nationalism as it tends to target foreign companies and rarely touches large state groups or monopolies," Qiao Mu, a journalism professor at Beijing Foreign Studies University, said to the Financial Times. Foreign automakers seem to face tighter scrutiny when doing business in China than their domestic counterparts, in general. The government there investigated several luxury brands, including Audi and BMW, last year for how they supplied spare parts and whether the components were overpriced. Some incurred fines, and Lexus decided to lower its prices. Volkswagen also experienced protests when owners felt the company wasn't handling a recall properly. The CCTV report also comes as many auto dealers in China are feeling a pinch due to high mandated sales targets from automakers. The situation was so dire in early 2015 several brands cut back sales targets and in some cases even paid the sellers to offset poor profits. News Source: Financial Times - sub. req., ReutersImage Credit: Andy Wong / AP Photo Government/Legal Mercedes-Benz Nissan Volkswagen Car Dealers Auto Repair Maintenance jaguar land rover