(Bloomberg) -- Volkswagen AG needs to take “decisive action” at its German factories to return them to full operating capacity, Chief Financial Officer Arno Antlitz said.
“Our aim is for our factories to be humming with activity,” Antlitz said Thursday at a conference hosted by Goldman Sachs in London. “The alternative is highly detrimental: each underutilized factory gradually bleeds out, becoming inefficient and continuously losing competitiveness.”
VW is pushing for unprecedented factory closures and wage cuts at its namesake brand, which is struggling with poor demand and waning relevance in China, the world’s largest auto market. The company is trying to reduce expenses in Germany, where labor and energy costs are among the highest in Europe. Management and labor leaders are set for a fourth round of talks next week.
Capacity utilization across VW’s German factory network has fallen over the past two decades to less than 60%, Bernstein analysts wrote in a November note, with an estimated unused capacity of as much as 800,000 units.
The carmaker has no plans to change its dividend policy and is sticking with a payout ratio of at least 30%, Antlitz said. Labor leader Daniela Cavallo had called on the carmaker’s board and shareholders to contribute a fair share to the brand’s restructuring, including smaller dividend payouts and reduced bonuses.
Antlitz told the conference that he is willing to go beyond any performance-linked pay reduction he sees under VW’s current renumeration program.
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