Volkswagen CEO Tells Publication Cost Cutting Necessary Amid "Structural Problems"

German carmaker Volkswagen, through its CEO Oliver Blume, revealed that the planned cost-cutting program the company announced was unavoidable to fix "decades of structural problems."

Blume, in an interview with the publication Bild am Sonntag, as reported by Reuters, stated that "the weak market demand in Europe and significantly lower earnings from China reveal decades of structural problems at VW."

Last Monday, the head of the work council of Volkswagen, said that the company was planning to shut at least three factories located in Germany. It also plans to lay off thousands of its staff and to further reduce the remaining plants it has in the country.

Volkswagen has not yet given confirmation on the mentioned plans. However, on Wednesday, it already requested employees to take a pay cut of 10%, justifying the move as the only way that the biggest carmaker in Europe would be able to stay competitive and save jobs. Arne Meiswinkel, the chief negotiator of the company, said that the measure would also include a revised bonus system, Bloomberg reported.

Blume noted that that the cost of business operations in Germany weighs down on the competitiveness of the company, underscoring the need for the operating cost in the country to be "massively reduced." He also said that there is no other option but to cut costs, and it is a matter of determining the manner how it can be achieved.

The conditions within the company have been intense due to talks of potential factory closures, which were revealed earlier in September. The announcement was met with a strong opposition from IG Metall union, which represents over 2.2 million employees from the areas of metals and electricals, iron and steel, textiles and clothing, wood and plastics, crafts and services and information and communication technology.

Reuters reported that the union must be able to negotiate new labor deals for more than 130,000 Volkswagen workers in Germany after the group ended agreements earlier in the month. The agreements protected employment at six plants since the mid-90s in western Germany.

In a note sent to employees, it noted that in the situation that the company was in, "even plant closures at vehicle production and component sites can no longer be ruled out."

Based on the annual report of Volkswagen, it has allocated approximately 900 million euros ($975.06 million) for the execution of its cost-cutting measures.