BERLIN, Sept 16 (Askume) – Volkswagen AG (VOWG_p.DE) plans to cut production capacity by 4 billion euros at the start of the fourth quarter, analysts at brokerage firm Jefferies said in a report after visiting the North American company’s executives. provision ($4.4 billion).
Earlier this month, Volkswagen said it was considering closing a factory in Germany for the first time in its history as part of a cost-cutting plan as it competes with Asian rivals.
“The rationale behind right-sizing the Volkswagen brand is not new, but management’s willingness and determination to deal with excess capacity and spending patterns is,” Jefferies analysts wrote in a note.
“After spending three days with management in North America, we are convinced there is no plan B that rules out capacity cuts,” he said, adding that these decisions could lead to provisions of 3 billion to 4 billion euros in the fourth quarter.
Jeffries did not reveal the purpose of the trip.
Volkswagen declined to comment.
Volkswagen last week scrapped long-term job protection plans at six of its German plants as part of a restructuring drive, triggering a clash with powerful unions who have fiercely opposed any pledges of cuts.
Jeffries wrote: “Unions should feel pressured to reach a new agreement and VW will be able to carry out layoffs. There is a risk of factory disruption, but unions can only strike over pay, not plant closures or layoffs.”
Jefferies said the costs could be between 2.5 billion and 3 billion euros, and could reach 4 billion euros, assuming severance pay is equivalent to two years’ salary per employee and “other severance costs are also included”, but he did not provide any details.
(1 USD = 0.9007 EUR)
