WOLFSBURG, Germany - Volkswagen on Thursday outlined an ambitious plan to juice profit in the wake of an emissions scandal, by dramatically ramping up the production of electric vehicles and by sharply reducing costs. In doing so, Volkswagen attempted to move the conversation away from the diesel scandal.
Too bad it's not that simple.
The carmaker said battery-powered vehicles could account for as much as 25 percent of total sales - 3 million vehicles a year - within a decade, up from a negligible level now. Then in the same breath, it announced cuts to research and development, necessary spending for such a dramatic shift.
Cost-cutting is a big piece of the plan. But labor has an unusually powerful voice at Volkswagen, so major cuts to the company's huge workforce are taboo.
And the diesel deception, in which the company admitted to rigging 11 million vehicles worldwide to cheat on emissions tests, isn't going away anytime soon. Volkswagen is in intense talks with lawyers for its U.S. customers about how much it must compensate them for manipulating emissions tests to make its diesel vehicles seem cleaner than they were. A court deadline to outline terms of the settlement was extended Wednesday by a week, to June 28.
"He said all the right things," Ferdinand Dudenhoffer, a professor at the University of Duisburg-Essen, said of Matthias Mueller, Volks- wagen's chief executive. "Now we have to see if he can get it done."
Dudenhoffer, who is often critical of the company, praised Mueller for recognizing moves underway in the auto industry, which include changes in driving habits and swift advances in self-driving cars.
But referring to the jobs issue, he warned Mueller "still has a problem he can't solve."
The markets appeared to share such concerns, with the company's stock price falling as much as 3.6 percent Thursday.
At a news conference, Mueller said little about the jobs issue, referring to continuing talks with labor representatives about how to make the company more efficient.
Instead, he focused on what he called a transformative strategy, one he said would increase operating profit to as much as 8 percent of sales by 2025, from 6 percent last year.
"Volkswagen is much more than diesel," Mueller said.
Even before the emissions scandal, Volkswagen had a cost problem, in part because it cannot easily cut its workforce.
Compared with other carmakers, the company's labor representatives hold exceptional power. Under a 1960 law in Germany that applies only to Volks- wagen, workers can veto plant closings and other changes.
The carmaker's employees also have a de facto majority on Volkswagen's supervisory board, which oversees top management. Ten of the 20 members of the board are employee representatives, in accordance with German laws that apply to all companies. Workers can rely on support from the state of Lower Saxony, which owns 20 percent of the company's voting shares and has two seats on the supervisory board.
The officials who occupy those seats almost always side with employees. So, in practice, Volks- wagen workers control 12 of the 20 seats on the supervisory board.
There is speculation the company may need to find a creative solution to cut costs now. In the early 1990s, when Volkswagen was close to bankruptcy, German employees agreed to a four-day workweek.
The plan unveiled Thursday also calls for Volkswagen to combine operations that produce automobile components. Putting the operations into a single division could reduce labor costs if Volkswagen later spun off the businesses, as U.S. auto manufacturers did years ago. The company did not announce any definite plans Thursday to do so.
Those operations employ 67,000 people at 27 factories and are one of the reasons Volkswagen employs far more people than Toyota. With about 610,000 employees, Volkswagen produces about the same number of vehicles as Toyota, which has 344,000 workers.
Volkswagen faces another problem its rivals do not have: the cost of the emissions scandal. The company has set aside $18.2 billion to cover fines and compensation to Volkswagen owners. Mueller said Thursday the amount appeared to be sufficient.
The company has also been losing ground to competitors in Europe. While it remains the largest carmaker in the European Union, its share including other brands such as Audi fell to 24 percent in May from 25.5 percent a year earlier.
Because of its high cost structure, Volkswagen earns almost no money selling cars with the VW badge. Most of its profit comes from the Audi and Porsche luxury car units, which are able to command a higher margin. And profit companywide has been declining, falling 19 percent in the first quarter to 2.4 billion euros.