Volkswagen considers closing factories amid rising costs, low demand

(MENAFN) On Monday, Volkswagen revealed it might close several of its factories in Germany as it grapples with escalating costs and financial challenges. In an internal memo viewed by AFP, Volkswagen CEO Thomas Schafer indicated that shutting down some production sites and component facilities could no longer be ruled out. He acknowledged that while the company remains committed to Germany as a key location for its operations, the "headwinds" facing the automaker have intensified significantly. Schafer emphasized the need for the company to enhance its efforts to navigate the current difficulties and maintain its position as a leading global manufacturer.

Volkswagen's announcement follows a previously disclosed plan for a €10 billion (USD11 billion) savings program aimed at cutting costs and reducing its workforce to boost profitability. However, recent results published in August revealed a decline in profits, prompting the company to reevaluate its strategies. The rise in operational costs coupled with diminished demand in China has led Volkswagen to lower its profit margin forecasts for the remainder of the year. The company has faced considerable challenges in its core operations and recognizes that further action is necessary to address the evolving dynamics in the automotive market and the broader German economy.

The internal memo also highlighted the need for a comprehensive restructuring across the brands within the Volkswagen Group. Despite the existing cost-cutting measures, the company’s board of directors has determined that additional steps are essential to adapt to the current market conditions and ensure long-term success. The situation underscores the urgent need for Volkswagen to reassess its business strategies and streamline its operations to remain competitive amid a turbulent economic landscape. 

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