Volkswagen's controlling families weigh in on restructuring battle, call for swift action

By Rachel More

BERLIN, Aug 7 (Reuters) - Volkswagen's controlling families dialled up the pressure on the German auto group's stakeholders on Friday, backing management's push for a dramatic restructuring that could cost tens of thousands more jobs.

Speaking as Porsche SE, the investment vehicle of the Porsche/Piech auto dynasty and Volkswagen's top shareholder, announced a drop in its adjusted post-tax earnings, its board chairman Hans Dieter Poetsch said the Volkswagen group "is at a historic crossroads".

"For the sake of the company and its sustainable competitiveness, everyone must now step up and take responsibility," Poetsch said.

"The longer decisions are delayed, the bigger the problems will become," he added.

The comments drew an angry response from Germany's top industrial union, which accused the families of placing dividends above workers.

VW BATTLING RISING COSTS, COMPETITION FROM CHINA

Volkswagen CEO Oliver Blume has pledged to drastically overhaul the group — which includes the VW mass-market business, premium brands Porsche and Audi, and luxury marque Lamborghini — as it battles high costs, tariff woes and intensifying competition from China.

Porsche SE finance chief Johannes Lattwein called on the group to reduce excess capacity, significantly cut costs, and strengthen decision-making.

Having already overseen tens of thousands of job cuts, Blume's latest restructuring plan threatens another 50,000 layoffs and the possible closure of four German plants.

The plan still needs the blessing of powerful labour representatives and the state of Lower Saxony, which has a 20% blocking minority, setting the stage for tense talks in the second half of the year.

Sources told Reuters that the labour side and Lower Saxony voted against Blume's plan at the last supervisory board meeting in July. The next meeting is expected in early September.

Volkswagen declined to comment on the matter. A company source said Porsche SE's position was understood as support for Blume's restructuring course.

The IG Metall union, which sits alongside representatives from Porsche SE, the works council and the state of Lower Saxony on Volkswagen's fractious supervisory board, said it would continue to defend workers and oppose plant closures.

"To secure their dividends, the (owner families) seem willing to jeopardize the livelihoods of those who have generated these profits in the first place over many years," a union spokesperson said.

He said competitiveness would come not from stringent cuts but from attractive products, innovation and a clear forward-looking strategy.

The works council and the Lower Saxony state government did not immediately respond to requests for comment.

'EVERY OPTION' MUST BE CONSIDERED

Lattwein said Porsche SE supports Volkswagen's management and its proposals, adding: "Competitiveness is the goal. Every option must be considered in pursuing it."

Porsche SE — which owns 31.9% of Volkswagen and 12.5% of Porsche — reported a 14.5% drop in its adjusted half-year earnings after tax to €949 million ($1.1 billion) on Friday.

Shares in the holding group dropped by as much as 1.7% after the earnings report before paring back their losses later in the day. Shares in Volkswagen and Porsche, largely flat early Friday, have fallen sharply in recent years.

Including impairment losses booked for its two core investments, Porsche SE swung to a net loss after tax of €2.2 billion in the first six months of the year, down from a €338-million profit a year earlier.

($1 = 0.8678 euros)

(Reporting by Rachel More, Simon Ferdinand Eibach and Emanuele Berro; Editing by Milla Nissi-Prussak, Thomas Seythal and Jan Harvey)