German auto giant Volkswagen said Monday it may close production sites in Germany as the auto industry struggles to contain rising costs.
“In the current situation, even factory closures in vehicle production and component factories can no longer be ruled out,” Volkswagen said in an internal memo sent to employees and seen by AFP.
Europe’s largest carmaker continues to view Germany as a “location,” but “the headwinds have become significantly stronger,” VW brand CEO Thomas Schäfer said in the document.
The challenging circumstances mean we “must now step up our efforts” to ensure the company’s long-term success, Schaefer said in the letter sent to employees.
“We want to remain the largest volume producer worldwide – and we do that on our own,” says Schaefer.
Volkswagen last year announced plans for a 10 billion euro ($11 billion) cost-cutting program and has said it plans to reduce its workforce in the coming years to improve profitability.
However, the group said further action was now needed after disappointing results published in August which showed a decline in profits.
Rising costs and demand for cooling in China also forced the group to cut its profit margin expectations for the rest of the year.
The core of the Volkswagen Group “now faces particularly great challenges,” the memo said.
Despite the cost-saving measures already announced, “current developments in the automotive market and in the German economy require further action,” the report said.
The company’s board of directors had decided that “the brands within Volkswagen AG should undergo a comprehensive restructuring”.
“The goal should be to optimize product costs, material costs and sales performance, as well as factory and labor costs,” the memo said, which referred to possible factory closures.
According to the memo, “simple cost-cutting measures” were no longer sufficient, and the group said it was open to further layoffs.
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