Volkswagen may book up to €4 billion (R78.6bn) in provisions for planned capacity cuts as early as the fourth quarter, analysts at brokerage Jefferies said in a note after travelling with company executives in North America.
Volkswagen said earlier this month that it was considering shutting plants in Germany for the first time in its history, part of a cost-cutting plan as it struggles to compete with Asian rivals.
“The rationale to re-size VW’s namesake (brand) is not new but management’s sense of urgency and determination to tackle excess capacity and spending patterns both are,” Jefferies analysts wrote in the note.
“Three days on the road in North America with management gave us conviction that there is no plan B that would rule out capacity reduction,” they said, adding decisions could lead to provisions of €3bn to €4bn in the fourth quarter.
Jefferies did not specify the purpose of the trip.
Volkswagen declined to comment.
As part of its restructuring push, last week, Volkswagen terminated a long-standing job security scheme for six of its German plants, clashing with powerful unions that have pledged fierce resistance against any kind of cuts.
“Unions should feel pressure to reach new agreements while VW will be in position to force lay-offs. There is risk of plant disruption, but unions can only strike on pay, not plant closure or lay-offs if the latter are not contractually protected,” Jefferies wrote.
Jefferies said charges could be around €2.5bn to € 3bn and up to €4bn, assuming separation costs of two annual salaries per worker and “including other closure costs” it did not specify. - REUTERS.