Volkswagen shares jumped 7% in early Frankfurt trading after the automaker reached a major turnaround agreement that eased tensions with unions and shareholder Lower Saxony.
The agreement, approved by Volkswagen’s supervisory board late Thursday, marks the biggest restructuring in the company’s 89-year history and includes a further 50,000 job cuts, bringing total planned reductions across the group to 100,000.
The deal also leaves the future of four German plants undecided, while averting a potential escalation between management, unions and Lower Saxony, which together hold a majority of seats on Volkswagen’s supervisory board.
Management had previously considered calling a shareholder meeting to push through its restructuring demands, which would have marked an unprecedented escalation of the conflict.
“The agreement … is a positive sign for Volkswagen and the capital market – even if it involves severe cutbacks amongst the workforce and within the group,” said Moritz Kronenberger of Volkswagen shareholder Union Investment.
“The ball is now entirely in the Executive Board’s court. There are no more excuses,” he said.
Volkswagen is attempting to improve profitability as it faces pressure from US import tariffs, a stagnant European market and aggressive Chinese competitors.
These pressures have weighed on the group’s operating margin, which stood at just 3.8% in the first half of the year.
Reuters
