German state leader urges joint effort to solve Volkswagen crisis

By Rachel More and Christina Amann

DRESDEN, Germany, Aug 31 (Reuters) - Volkswagen's workers, management and political leaders must work together to minimise the impact of job and capacity cuts at Europe's biggest automaker and boost its competitiveness, the state leader of Saxony said.

State premier Michael Kretschmer, a member of Chancellor Friedrich Merz's conservative CDU party, is under pressure to shield auto jobs in Saxony, a poorer part of Germany and stronghold for the far-right AfD.

Volkswagen is Saxony's largest private employer, employing some 10,000 people across three sites, with tens of thousands more jobs tied to the company through its supplier network.

The sites include Volkswagen's all-electric car factory in Zwickau, which is one of four plants that senior management have said has no clear future beyond 2030.

"We all need to work together on this," Kretschmer told Reuters. "It simply has to become better, easier, and more cost-effective to manufacture in Germany," he told Reuters.

TALKS DID NOT YIELD A SOLUTION

Kretschmer met Volkswagen CEO Oliver Blume and Supervisory Board Chairman Hans Dieter Poetsch last week to discuss Zwickau's future, but said no specific solution was put forward.

"Our goal is to enable and maintain production in Germany and not to outsource it abroad," Kretschmer said.

He said a decision on Zwickau's future was needed in the coming months, to ease the impact on worker morale, boost productivity, and allow time for the transition to potential new models.

Among the problems, Kretschmer cited high energy prices in Germany.

He also criticised the European Union's plans to phase out combustion engines even though the bloc has softened a previous 2035 target.

The expansion of EU import tariffs to cover plug-in hybrids made in China could be part of a broader solution, Kretschmer said, but added that protectionism would not solve the core issue.

He also backed Volkswagen management's plans to simplify its structures and model portfolio.

Another possible solution would be to renegotiate Volkswagen's collective bargaining agreement to extend working hours from 35 to 40 hours a week, he said.

Germany's biggest union IG Metall has made keeping a 35-hour week a core demand.

(Reporting by Rachel More, Christina Amann and Oliver Denzer; Editing by Christoph Steitz and Barbara Lewis)