Volkswagen has issued a warning about the potential closure of the Brussels site for its luxury brand Audi due to a significant decline in demand for high-end electric vehicles (EVs). This slump has impacted Europe’s leading car manufacturer, prompting a revision of its financial forecasts for the current year.
Potential Plant Closure:
- Historical Context: Volkswagen has not shut down a plant since 1988, when it closed its Westmoreland site in Alabama. The last VW brand chief to suggest European plant closures resigned shortly after making the statement.
- Economic Impact: Closing or repurposing the Brussels plant, along with other unforeseen costs, could result in financial impacts up to €2.6 billion ($2.8 billion) in 2024.
Financial Revisions:
- Operating Returns: Volkswagen lowered its operating returns forecast to 6.5-7% from the previous 7-7.5%.
- Parent Company: Porsche SE, holding a significant share and voting rights in Volkswagen AG, reduced its earnings forecast to €3.5 billion to €5.5 billion.
- Stock Market Reaction: Frankfurt-listed shares for Volkswagen and Porsche SE dropped by 1.7% and 2.1%, respectively.
Audi’s Challenges:
- Sales and Production: Audi’s Q8 e-tron, launched in 2018, has seen a sharp decline in demand. Production may cease by 2025.
- Structural Issues: The Brussels plant, which produced around 50,000 cars last year, faces structural challenges such as logistical costs and layout constraints due to its proximity to the city.
- Employee Impact: The plant employs approximately 3,000 people. A consultation process will explore alternative solutions, with the possibility of ceasing operations if none are found.
Operational and Financial Pressures:
- Component Shortages: Audi’s first-quarter operating profits fell by 20%, partly due to delivery delays after the Brussels plant closed for two weeks in February.
- Exchange Rate Losses: Volkswagen Group also faced unplanned expenses from exchange rate losses and the deconsolidation of Volkswagen Bank Rus.
- Subsidiary Closure: The planned closure of the gas turbine business of subsidiary MAN Energy Solutions added to the financial strain.
Response from Employee Representatives:
- Future-Proof Perspective: Rita Beck, spokeswoman for the Audi Committee in the European VW Group Works Council, called for a sustainable future for the Brussels plant and its employees, urging Audi management to take responsibility for the site.
The automotive industry’s investment in EV technology has not met anticipated demand, leading to significant challenges and strategic reassessments for manufacturers like Volkswagen and its subsidiaries.
