(Bloomberg) -- Volkswagen AG managers are facing hefty pay reductions in the coming years as part of an agreement with labor to make Europe’s biggest automaker more competitive.
Around 4,000 VW managers will give up bonuses equal to about 10% of their annual income next year and in 2026, with smaller reductions through the end of the decade, Sueddeutsche Zeitung reported Sunday. Unionists are calling for senior leadership, including Chief Executive Officer Oliver Blume, to forgo more than 10% of their salaries, the newsaper said.
The measures are part of a restructuring agreement to slash costs at the namesake VW brand while avoiding factory closures. VW reached the deal on Friday, preventing further walkouts after three months of tense negotiations. While both sides welcomed the accord, the cuts fall short of the drastic action originally called for by management.
The measures are “missing a sense of urgency to match the pace of industry change,” Jefferies analyst Philippe Houchois said in a note.
VW shares declined 2.4% as of 11:35 a.m. in Frankfurt on Monday and are down almost a quarter this year.
Blume was looking for a fresh start to turn around VW as it confronts dwindling market share in China and slowing demand for electric vehicles in Europe and the US. VW and its peers also are facing billions of euros in fines if they fail to meet stricter European fleet-emissions rules slated to kick in next year.
The labor agreement includes reducing capacity at five sites by several hundred thousand units, and shrinking the workforce by more than 35,000 over the next five years. Those are meant to save an estimated €4 billion ($4.2 billion) per year over the medium term.
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