Volkswagen AG will potentially shutter an Audi electric-vehicle factory in Belgium to avoid wasting costs, in what could be a watershed moment for Europe’s biggest carmaker.
The manufacturer has never closed a automotive plant within the region, however the high-expense Brussels site could develop into the primary because of poor demand for an electrical SUV made there. Volkswagen cited additional expenses including from the restructuring for lowering its outlook for the 12 months.
Carmakers have been grappling with poor EV sales, prompting a variety of manufacturers including 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 incumbents with recent competitors like China’s BYD Co. moving in on their turf. Volkswagen’s strong union presence has complicated the corporate’s past restructuring efforts.
Closing the plant could be “a significant step in the correct direction,” Deutsche Bank analysts led by Tim Rokossa said in a note. “Most investors would haven’t seen that as a possibility.
The German carmaker reduced its forecast for operating return to as much as 7%, down from a previously predicted high of seven.5%, in response to a filing late Tuesday. Additional costs burdening this 12 months’s results are expected to total €2.6 billion ($2.8 billion).
Audi’s management has been in discussions with the Belgian government in regards to the way forward for its Brussels factory, which only makes the luxurious Q8 E-Tron model and derivatives. Closing it down is simply one among several restructuring options, Volkswagen said.
The move is “a part of the price efficiency and re-sizing program happening 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.”
Audi’s site near Brussels employs some 3,000 people and has been making the Q8 e-tron since 2022. The Deutsche Bank analysts estimated that severance packages alone would amount to a “sizable” triple-digit-million-euro amount.
VW also detailed additional costs included exchange rate losses, expenses in reference to the planned closure of the gas turbine business of MAN Energy Solutions SE and provisions for termination agreements to chop 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.
VW will publish its financial report for the primary half on Aug. 1.
This Article First Appeared At www.autoblog.com
