Volkswagen rescue plan blocked by powerful labour faction, sources say

By Rachel More and Christina Amann

BERLIN, July 10 (Reuters) - Volkswagen's powerful labour representatives have blocked a sweeping restructuring, company sources said on Friday, as Europe's largest automaker contends with multiple existential challenges.

CEO Oliver Blume is battling to make the sprawling automotive group leaner in the face of growing competition from China, billions of euros in U.S. tariff costs and concerns over the competitiveness of its German factories.

But the company's stakeholder structure, in which unions and the government of Lower Saxony have representatives on the supervisory board, makes decision-making complicated.

At a meeting of the supervisory board on Thursday, the committee voted against management's proposed restructuring by 12 to seven, driven by opposition from the labour side, two company sources told Reuters.

A spokesperson for the supervisory board declined to comment on the outcome of the meeting.

ANALYSTS SAY PLAN LACKS DETAILS

The company issued a statement after the talks, but analysts said the 'future plan' it trumpeted was lacking in detail and showed a failure to push through tougher measures.

Sources close to the matter had previously said Blume's proposal involved job cuts of up to 100,000 across the group, with four German plants at risk of closure.

Volkswagen made no mention of possible job cuts or plant closures late on Thursday. Instead, it repeated largely known targets to reduce complexity — measures that did not require the blessing of the supervisory board.

Jefferies analysts said there was "no indication of progress towards an agreement having been reached". Bernstein analysts said the plan was "long on ideals, but very short on specifics".

Some analysts welcomed the streamlining plans. These include a reduction in global production capacity to 9 million cars a year, down from 10 million, and up to 50% fewer models in a gradual shake-up of the group's product portfolio, which ranges from mass-market brands VW and Skoda to sports-car maker Porsche and luxury marque Lamborghini.

Shares in Volkswagen were up 0.8% by 0807 GMT.

Volkswagen's works council has demanded clarification on management's cost-cutting plans by the end of Friday.

Lower Saxony premier Olaf Lies said the state was working with management to overcome the challenges.

"Everyone involved is fully aware that Volkswagen and the automotive industry as a whole are currently facing a critical situation, with an extremely challenging international competitive environment," Lies said.

(Additional reporting by Alexander Huebner and Andreas RinkeEditing by David Goodman)