Can't hold on! Volkswagen is calling the situation extremely tense, considering closing the German factory!
Volkswagen AG is considering closing domestic factories to reduce costs due to global consumption downgrades and intensified market competition. The company stated that it is facing significant cost-cutting measures, and although some progress has been made, overall performance is still below expectations. In the first half of the year, pre-tax profit fell by 11.4%, with an operating profit margin of 6.3%. However, the plan has faced strong opposition from the union, with company executives emphasizing the severe economic situation and the need for swift action, stating that the problem cannot be solved solely by cost-cutting measures in the short term
Investment Insights - German automaker Volkswagen is considering closing its factories in Germany to cut costs, but the plan is facing strong opposition from the union.
On Monday (September 2), German automaker Volkswagen (VWAGY.US) warned that "the company will no longer rule out the possibility of closing its factories in the country in order to take significant cost-cutting measures for future needs."
Affected by global consumption downgrade and intense competition in the automotive industry, the Volkswagen Group announced a cost-saving plan last December and has been continuously cutting costs since the beginning of this year. Despite making some progress, the overall situation is still unsatisfactory.
In the first half of this year, Volkswagen Group's earnings before interest and taxes (EBIT) were 10.052 billion euros, a year-on-year decrease of 11.4%; the operating profit margin fell to 6.3%, lower than the 7.3% in the same period last year. In addition, the company is expected to lower its full-year operating profit margin forecast.
So far this year, Volkswagen Group's stock price has continued to decline, falling by nearly 14% in total, once again hitting lows from 2010, 2015, and 2020.
【Volkswagen Group stock price trend chart, source: Google】
Regarding the challenges faced by Volkswagen Group, CEO Oliver Blume pointed out, "The economic environment has become more severe, and new competitors are entering the European market. Germany, as a manufacturing center, is falling further behind in competitiveness." He also stated, "The company must take decisive action now."
Furthermore, Volkswagen Brand CEO Thomas Schäfer also stated, "The situation is extremely tense, and cannot be resolved through simple cost-cutting measures."
In the long run, closing factories at Volkswagen is beneficial for cost reduction and profit improvement. However, the plan may not be successfully implemented as it is currently facing strong opposition from the General Works Council and IG Metall, two major unions
