Volkswagen shares fall in Frankfurt amid rumours of a restructuring plan. Weak demand in China
Up to 100,000 job cuts and the closure of four production sites in Germany are on the cards, as part of one of the largest restructuring programmes in the country’s industrial history
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(Il Sole 24 Ore Radiocor) – Shares in Volkswagen are being sold on the Frankfurt Stock Exchange. The car manufacturer is reportedly considering a restructuring plan worth up to 11 billion euros, involving 100,000 job cuts and the closure of four production sites in Germany, as part of one of the largest restructuring programmes in its industrial history.
Analysts at Banca Akros point out that ‘the plan, reportedly based on documents presented by CEO Oliver Blume and cited by Manager Magazin, comes shortly after similar signals regarding cost-cutting from Porsche’s CEO, Michael Leiters, who has indicated his intention to streamline the product portfolio and increase synergies within the Volkswagen Group’.” Therefore, according to the brokers, “the environment remains characterised by weak demand in China and geopolitical pressures, factors also highlighted by the recent profit warning” from BMW. More specifically, the restructuring is expected to involve a reduction in the group’s investments of around 15%, bringing total expenditure to just over 130 billion euros over the next five years.
The Volkswagen brand, which has long been under pressure in terms of profit margins, and the component manufacturing businesses are set to be transformed into independent entities. At the same time, the group is considering closing major German plants, including those in Hanover, Zwickau and Emden, as well as the Audi plant in Neckarsulm, once the current models have reached the end of their life cycle. The target for workforce reduction has been doubled compared with previous plans, reaching 100,000 jobs, out of the current global workforce of around 657,000. The restructuring proposal is expected to be formally presented to the Supervisory Board next month.
The strategy also aims to achieve a structural cost reduction of €11 billion by the end of the decade.
According to experts, ‘for European car manufacturers – including Stellantis (target price 9 euros) in our coverage – the implications are significant. Cost-cutting programmes are likely to be accelerated, with increasing focus on the rationalisation of production platforms, the vertical separation of business units and greater discipline in capital expenditure (capex). Mass-market vehicle manufacturers remain structurally more exposed to price pressure from Chinese manufacturers and to the risk of underutilisation of production capacity at their plants.”
