Berlin, Germany

As German automaker Volkswagen starts executing its ambitious cost-cutting drive, it faces agony from the workers and executives. The management, in its meeting with the workforce at its headquarters on Wednesday, will face a tense and fearful environment as it proposes painful cuts, including factory closures in Germany, to hit an ambitious profit target at its namesake brand. The company's Chief Financial Officer Arno Antlitz and brand chief Thomas Schaefer will give speeches detailing the automaker's plans at the meeting in Wolfsburg, a small city in northwest Germany built to house the massive Volkswagen plant.

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Opposing them will be works council head Daniela Cavallo, who was elected by workers. She will use the meeting to make clear her "fierce resistance" to cuts, she told reporters. She warned that the emotions will run high and management will be "very uncomfortable" at the meeting, expected to last several hours.

On Monday, Volkswagen proposed closing of factories in Germany and ending a decades-old job guarantee at six of its plants. This comes as a part of Volkswagen's 10 billion euro (USD 11.04 billion) cost-cutting drive as the automaker is targeting a 6.5% profit margin at the brand by 2026, up from 2.3% in the first six months of this year.

This is evident in the upcoming wage negotiations between Volkswagen management and the IG Metall union as Thomas Knabel indicated. The union wants an overall debate on the strategic direction of the company before any issue concerning wages can be addressed. They demand that Volkswagen withdraws its threat to shut down plants as a demand that must be met before engaging in negotiations. This position shows that the labor strives for job security while the company has financial problems it has to solve.

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Volkswagen’s management has blamed the problems at Volkswagen to poor economic conditions and rising competition. However, the union points out that the company’s problems are also due to inefficient production methods and delays in the development of electric car technology. This suggests a fundamental struggle for how Volkswagen should proceed in the future.

This is especially the case because more often than not, the company is large, and the potential changes can result in highly significant economies. For instance, Philippe Houchois from Jefferies stated that he did not expect an easy negotiation process as reaching a consensus between the management and unions in the current economic climate will not be easy.