German car producer Volkswagen (VW) is mulling the unprecedented option of closing some factories in Germany, the company tells Kallanish.
“The economic situation has become even more difficult and new players are invading Europe,” company chief executive Oliver Blume says in an official statement. “Germany continues to decline as a business location in terms of competitiveness. In this environment, we as a company must now act decisively.”
According to the company, Volkswagen Passenger Cars aims to contribute a sustainable earnings impact contribution of €10 billion ($11 billion) by 2026. “However, the current developments in the automotive market and the German economy demand further action,” it adds.
For the entire Volkswagen AG group, the priority now is to create the financial scope for investments in future products, without which production capacity at sites will be underutilised.
From the board’s perspective, the brands within Volkswagen AG must undergo comprehensive restructuring. The goal is to optimise product costs, material costs, and sales performance, as well as factory and labour costs, VW notes.
“In the current situation, even plant closures at vehicle production and component sites can no longer be ruled out without swift countermeasures,” the carmaker observes. “The situation is extremely tense and cannot be resolved through simple cost-cutting measures. This is why we want to initiate discussions with employee representatives as soon as possible to explore the possibilities for sustainably restructuring the brand.”
In the company’s view, restructuring based solely on demographic developments is insufficient to achieve the urgently needed structural adjustments for greater competitiveness in the short term. It therefore feels compelled to terminate the employment protection agreement that has been in place since 1994, it adds.
The possible closure of plants in its home country would be a first in the 87-year history of the German automotive icon.
According to German automotive experts, increasing the revenue and profit of the Volkswagen brand is becoming an increasingly difficult mission due to rising logistics, energy and labour costs. The German company is also losing momentum in its biggest market, China, with its EV models lagging far behind rivals, while cheaper Chinese cars are also entering Europe.
Svetoslav Abrossimov Bulgaria