Volkswagen CEO, labour boss dig in ahead of key board meeting

By Rachel More

OSNABRUECK, Germany, Aug 26 (Reuters) - Volkswagen's management and labour leaders dug in on Wednesday ahead of a crucial board meeting next week, with CEO Oliver Blume pushing deeper cost cuts and unions rejecting layoffs and plant closures in the German group's biggest ever restructuring.

Europe's largest automaker is considering measures that could double the planned number of job cuts, close factories and carve out parts of the business as it seeks to revive profits and fend off growing competition from Chinese rivals.

Blume visited Volkswagen's electric vehicle plants in Emden and Zwickau, both considered vulnerable under the restructuring plan, where he praised employees' efforts to cut costs but warned that more would be needed.

"This journey is not over. Because we not only measure ourselves against our own past performance. We measure ourselves against the best locations in Europe," Blume told staff at both sites, according to excerpts of speeches released by the company.

"Labour costs today are more than double those of comparable European locations. And when it comes to factory costs, other plants are still significantly cheaper. This is not a criticism — it is the reality against which we must measure ourselves," he said.

The plans will be discussed at a September 4 supervisory board meeting. Labour representatives and the state of Lower Saxony, which have traditionally been opposed to major job losses, hold a majority on the board.

Emden is in Volkswagen's home state of Lower Saxony, which faces state elections next year. Zwickau, which Blume said had set a particularly strong example with lower costs, is in the eastern state of Saxony, outside the company's traditional power base.

Both factories, along with Volkswagen's campervan plant in Hanover and subsidiary Audi's plant in Neckarsulm, currently lack a business plan beyond 2030.

Osnabrueck, about 150 km (93 miles) south of Emden, is also under threat, with vehicle production there due to end as early as next year.

Daniela Cavallo, head of Volkswagen's powerful works council, told reporters in Osnabrueck that layoffs and site closures would not solve problems caused by tariffs, Chinese competition and weak European demand.

"A vision for the future must consist of many different elements. It cannot ... be solely about sites, labour costs and staff cuts," she said.

Blume, who is touring Volkswagen sites this week to build support for the restructuring, has described plant closures as a last resort.

Osnabrueck could yet be preserved through a partnership with the defence industry, although lengthy discussions have so far failed to produce a breakthrough.

In Emden and Zwickau, Blume said that Volkswagen's commitment to the sites would not end even if future vehicle production could not be secured.

"We will fight for industrial prospects and jobs at our locations, with partners, with investors, and with new industrial solutions," he said.

(Reporting by Rachel More. Writing by Christoph Steitz. Editing by Matthias Williams, Elaine Hardcastle and Mark Potter)