Volkswagen wins workers’ backing for restructuring; to set up $1-b battery plant

Reuters | | Updated on: May 14, 2019

It will explore sale of MAN Energy, Renk, and listing truck business

Volkswagen workers backed a restructuring of the world’s largest carmaker on Tuesday after Chief Executive Herbert Diess pledged to spend €1 billion ($1.1 billion) on a new battery cell production plant near its headquarters in Lower Saxony.

Diess needs the support of Volkswagen’s powerful unions as he attempts to slim down and simplify the German company, which has 12 brands spanning trucks, buses, motorbikes, cars and electric bicycles.

VW’s leadership has embraced a strategic shift towards e-mobility, which requires less manpower to produce cars, to help it shed the shadow of the diesel emissions test cheating scandal that damaged its finances and reputation.

Labour opposition has stifled previous restructuring efforts at VW, which also said it plans to list its trucks business, integrating its MAN and Scania divisions to create a global challenger to Daimler and Volvo.

“The employee representatives on the supervisory board welcome the decisions, which they expressly support.

“These decisions set the course for sustainable further development of secure jobs as well as profitability,” labour chief Bernd Osterloh said in a letter to VW’s employees on Tuesday.

VW had said on Monday it would resume preparations for listing the trucks business, which is called Traton, before the summer break, reversing an earlier decision to postpone the listing due to shaky markets.

It also said it is exploring a sale of MAN Energy Solutions, which makes diesel engines for use in ships and power stations, as well as a full or partial sale, joint ventures or partnerships for transmissions maker Renk.

Reuters reported earlier this month that VW had approached several companies to gauge their interest in buying MAN Energy Solutions, which is expected to achieve a valuation of about €3 billion in a potential sale.

IPO plan

Finance Chief Frank Witter said in a statement that “current market assessments” had encouraged VW to proceed with the Initial Public Offering (IPO), which could yield up to €6 billion if a 25 per cent stake is listed. Jefferies analyst Philippe Houchois estimated Traton was worth €15-16 billion.

“A listing should be positive as the current VW balance sheet is in our view a constraint on Traton’s ability to execute on its ‘Global Champion Strategy’.”

Osterloh said talks between labour representatives and VW management over working conditions and restructuring plans were going well and a conclusion could be reached in May. VW said it would seek to build a battery cell production factory in Salzgitter, Lower Saxony, if economic pre-conditions, such as subsidised electricity, could be met.

Published on May 14, 2019
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