Volkswagen shares slip as it considers Brussels plant closure

Volkswagen shares slip as it considers Brussels plant closure

A Volkswagen logo is seen at the New York International Auto Show Press Preview, in Manhattan, New York City, U.S., March 27, 2024. 

David Dee Delgado | Reuters

Volkswagen shares dipped Wednesday after the company issued an overnight profit warning and announced it was considering the potential closure of an Audi plant in Brussels.

The company has now lowered the forecast for its operating return on sales to a 6.5% to 7% range, from 7% to 7.5% previously.

It noted that it is also considering the restructuring or potential shutdown of its Audi plant in Brussels, where it employs 3,000 people, on the back of weak demand for the Audi Q8 e-tron line — a fully electric offering from the brand, launched in 2019.

Automakers have contended with waning electric vehicle demand, with European brands facing the compounded challenge of a wave of discounted, state-subsidized rival vehicles produced in China. The EU earlier this month began to implement provisional tariffs on EVs imported from China, as a result.

If it presses ahead, this would mark Volkswagen’s first factory shutdown in nearly four decades, since the 1988 closure of its plant in Westmoreland County, Pennsylvania.

The cost of the prospective closure or of finding an alternative use for the site, among other factors, could lead to a hit of up to 2.6 billion euros ($2.81 billion) to the company’s operating profit in the 2024 fiscal year, Volkswagen said.

Deutsche Bank analysts qualified the potential Brussels factory shutdown as a “major step in the right direction,” anticipating related costs will not be cash-relevant in the short term. Analysts at brokerage Stifel meanwhile labeled Audi as “Volkswagen’s biggest problem” and “the biggest concern for investors” on a divisional basis.

“The bigger issue is the severe delay in new models in recent years; Audi has been falling behind Mercedes and BMW. We calculate that the average age of Audi’s portfolio is now six years (BMW: three years, Mercedes 3.6 years),” they said.

Volkswagen has also suffered a slump in overall deliveries. The Volkswagen group delivered 2,243,700 vehicles worldwide over the April-June period, according to the Frankfurt, Germany, bourse — down 3.8% on the same period of last year. Audi’s performance weighed on the results, down 11.3% year on year over the three-month stretch.

Deliveries to China fell by a steep 19.3% in the second quarter, but were up 5.1% in Western Europe and 10.8% in North America.

Volkswagen’s stock was down 1.45% at 11:14 a.m. London time on Wednesday. The company is scheduled to present its second-quarter results on Aug. 1.

105162575 2017 tacoma - Volkswagen shares slip as it considers Brussels plant closure

CNBC’s Ganesh Rao contributed to the report.

Correction: In 1988 Volkswagen closed its plant in Westmoreland County, Pennsylvania. An earlier version misstated the location.

Original news source Credit: www.cnbc.com

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