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The billionaire Porsche-Piëch family, Volkswagen’s majority owner, has taken a hardline stance in backing the company’s plans to close several German factories, as the threat of diminished dividends looms.
Lack of progress on the restructuring, initially announced in September, has become a growing concern for the Porsche-Piëch family, which has reversed its traditional stance of avoiding confrontation with VW’s powerful works council.
According to one person briefed on discussions at recent supervisory board meetings, the family has “made clear that it is necessary to rightsize the business in order to achieve long-term competitiveness”.
VW has argued for the closure of plants in Germany as its European sales have fallen sharply. However, the company’s works council, which controls half the seats on the company’s supervisory board, has promised workers that not a single German plant will be closed.
Another person with knowledge of the discussions said it was “hardly surprising” that the Porsche-Piëch family had different priorities than some other supervisory board members, especially the works council and its ally, the state of Lower Saxony, which holds 20 per cent of VW’s voting rights.
Worker representatives have argued that while cost cuts might support profit margins in the short term, they will do little to address sliding sales in both Europe and China, the company’s most profitable market.
Executives at Europe’s largest carmaker have spent weeks locked in tense negotiations with representatives of German workers, who have already downed tools twice in the past month amid fierce disagreement over planned cost cuts.
VW’s management and unions are eager to wrap up formal wage negotiations before Christmas. After 36 hours of continuous debate, the fifth round of talks broke off briefly on Wednesday morning with both sides agreeing to resume negotiations later in the day.
At VW’s supervisory board meetings in the run-up to the negotiations, discussions have been tense. The family’s de facto head, Wolfgang Porsche, last month rejected a compromise put on the table by the works council and union, making clear that anything other than “substantial action on cost efficiency [will be a] solution”, added one person briefed on the talks.
Porsche SE has already taken a hit from the crisis at VW. Last week, it warned that the uncertainty at the carmaker and the absence of financial planning data could force it to write down its stake in VW by up to €20bn, or nearly 40 per cent.
The family also faces the risk of falling VW dividends, which last year stood at €1.4bn, at a time when Porsche SE is saddled with €5.1bn in debt. The holding company borrowed heavily in 2022 to buy a 25 per cent voting stake in sports car maker Porsche AG — allowing the family to regain direct control over the company founded by its forebears.
“The plan was to finance the interest payments and to deleverage with the dividends from Porsche and VW,” said Stifel analyst Daniel Schwarz. “That’s clearly at risk now,” he added, explaining that the family’s wealthiest members “have most of their wealth invested in this one company”.
But the family’s battle with the carmaker’s workers carries other risks.
With Berlin gearing up for snap elections early next year, the hardline plan to cut tens of thousands of jobs at VW has met significant political blowback. A growing group of politicians — including Chancellor Olaf Scholz — have spoken out against factory closures.
“Some politicians have argued that VW should not pay a dividend at all and the union said that VW should consider a lower payout ratio,” Schwarz said.
The upcoming elections will also make it less likely that the state of Lower Saxony which tends to back employment, would turn against the works council on the plant closures.
