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VW's labor chief says U.S. operations a 'disaster'

The logo of German carmaker Volkswagen is seen at a VW dealership in Hamburg, October 28, 2013. REUTERS/Fabian Bimmer
The logo of German carmaker Volkswagen is seen at a VW dealership in Hamburg, October 28, 2013. REUTERS/Fabian Bimmer

By Andreas Cremer and Jan Schwartz

WOLFSBURG, Germany (Reuters) - Volkswagen AG's top labor representative has dubbed the carmaker's U.S. operations a "disaster" and called for more models and swift decisions to revive the German group's declining fortunes in the world's second-largest auto market.

While VW has risen to become the biggest automaker in China and Europe, the group has yet to fully understand how to succeed in the United States, Bernd Osterloh, VW's works council chief, told reporters in Wolfsburg on Wednesday.

"The U.S. are a case of disaster" for VW, said Osterloh, who also sits on the carmaker's supervisory board.

The German multi-brand group last month ousted U.S. divisional chief Jonathan Browning, who oversaw the much-lauded 2011 launch of the midsize Passat, sales of which declined 6.3 percent last year after a 2011/12 surge.

Osterloh echoed criticism from the company's new head of U.S. operations, Michael Horn, who this month said that VW headquarters had paid little heed to the dynamics of the U.S. market.

VW's situation in the United States, where the company has been grappling with losses for years, will not improve until 2016 and it needs more models there, including a pickup truck, Osterloh said.

At the Detroit auto show last week, VW announced plans to make a midsize sport utility vehicle (SUV) for North America as part of a $7 billion investment in the region.

Osterloh lamented that a year after the "CrossBlue" SUV was unveiled, it is still unclear where the model will be built. The carmaker favors its U.S. plant in Chattanooga, Tennessee, over a factory in Puebla, Mexico, a source familiar with the matter told Reuters.

VW's labor leader said that Chattanooga would make sense from an economic viewpoint if the company could offset the higher personnel costs compared with Puebla.

NEW VEHICLE NOT LINKED TO UAW

Osterloh wants a German-style works council which represents both assembly line workers and management to be put in place at Chattanooga, the only wholly owned VW plant that does not have such a group. In order to do so under U.S. labor law, a U.S.-based union must represent plant workers, and VW has been in talks with the United Auto Workers about filling that role.

On Wednesday, Osterloh said a works council in league with the UAW does not need to be in place for him to support a new vehicle for production at Chattanooga.

"These issues must be treated separately, there's no connection whatsoever," he told reporters.

This is contrary to some of Osterloh's comments last year, when he said that having a works council at Chattanooga would help the plant's chances of landing the midsize SUV production.

OK WITH MANAGEMENT CHANGES

Osterloh said that the carmaker would be able to cope with changes to top management at any time. Five of the nine executives, including CEO Martin Winterkorn, are older than 60.

"I believe we can react quickly if we're in need of (personnel) changes," Osterloh said.

Speculation about a potential lack of a younger generation of leaders at VW flared up last September when the carmaker denied a report claiming that 76-year-old chairman Ferdinand Piech would soon step down for health reasons and be replaced by 66-year-old Winterkorn.

Osterloh said he is counting on both Piech and Winterkorn to serve at least until 2018, the year VW has pledged to overtake Toyota Motor Corp <7203.T> and General Motors Co as the world's biggest carmaker by volume.

"I would be one of the first who would find out if one of those two wants to go," said Osterloh, a member of the board's influential steering committee.

(Additional reporting by Bernie Woodall in Detroit; editing by Mark Potter, David Goodman and Matthew Lewis)

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