VW Weighs First-Ever Car Plant Closing in Europe to Cut Costs

July 10, 2024 08:09 PM AEST | By EODHD

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VW Weighs First-Ever Car Plant Closing in Europe to Cut Costs — Image source: Kalkine Media

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(Bloomberg) -- Volkswagen AG lowered its outlook for the year, citing costs related to a potential Audi plant closure in Belgium after disappointing demand for the electric Q8 e-tron and other unplanned expenses. Most Read from Bloomberg Saudis Warned G-7 Over Russia Seizures With Debt Sale Threat Hurricane Beryl Makes a Mockery of Texas Climate Deniers Microsoft Orders China Staff to Use iPhones for Work and Drop Android The End of the Cheap Money Era Catches Up to Chelsea FC’s Owner Asia’s Richest Banker Gets Caught in Adani-Hindenburg Crossfire The German carmaker reduced its forecast for operating return to as much as 7%, down from a previously predicted high of 7.5%, according to a filing Tuesday. Additional costs burdening this year’s results are expected to total €2.6 billion ($2.8 billion). Audi’s management has been in discussions with the Belgian government about the future of its Brussels factory, which only makes the luxury Q8 e-tron model and derivatives. It said in March that it would take a decision by the end of the year.

The move to shutter the plant is “part of the cost efficiency and re-sizing program taking place at VW,” Jefferies analyst Philippe Houchois said in a note. It’s “a possible indicator of upcoming restructuring actions across the European automotive industry in coming years.” Carmakers have been grappling with poor EV sales, prompting a range of manufacturers including VW and Mercedes-Benz Group AG to rethink plans. Key regions including Germany, Europe’s biggest auto market, have removed or cut incentives for EVs, raising the pressure on incumbent manufacturers with new competitors like China’s BYD Co. moving in on their turf. Audi’s site near Brussels employs some 3,000 people and has been making the Q8 e-tron since 2022.

VW also detailed additional costs included exchange rate losses, expenses in connection with the planned closure of the gas turbine business of MAN Energy Solutions SE and provisions for termination agreements to cut personnel across the group. The German government this month blocked the sales of the turbine unit to a state-owned Chinese shipbuilding company over national security concerns. Separately, Porsche cut its profit outlook after tax, citing equity investment in Volkswagen. VW will publish its financial report for the first half on Aug. 1.

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